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FINfacts™ XXIV – No. 48 | December 7, 2016
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| Prime Rate |
 3.50 |
| 1 Month LIBOR |
 .65 |
| 6 Month LIBOR |
1.29 |
| 5 Yr Swap |
 1.80
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| 10 Yr Swap |
2.17
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| 5 Yr US Treasury |
1.80
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| 10 Yr US Treasury |
2.34
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| 30 Yr US Treasury |
3.08 |
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Rate: 4.56% Fixed
LTC: 66%
Term: 10 Years
Amortization: 5 years IO; 30 Years thereafter
Non-Recourse
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Transaction description
George Smith Partners arranged the $7,800,000 acquisition loan for a 10,397 square foot creative office in San Francisco. Recently leased by a global financial services firm, the trophy asset was previously repositioned into creative office, while maintaining historical architectural heritage of the original building. Emphasizing the importance of closing as applied for, this escrow represented the Sponsor’s “down leg” for a 1031 exchange. Fixed for ten years at 4.56%, the non-recourse loan offers 5 years of interest only before amortizing over 30 years.
Challenges
It was crucial to identify a Lender who would underwrite full proceeds on a tight capitalization rate where loan proceeds would be cash flow constrained. High dollars per square foot was requested for a non-investment grade tenant who had only 7 years remaining on the first term of the lease.
Solution
GSP identified a Lender who was confident with the submarket and understood the value of the location and physical real estate. Lender underwrote to a very aggressive debt yield and felt comfortable with the tenant’s financial strength to merit very high loan dollars per square foot. The lender closed on time and at fully request proceeds.
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Rate: Prime + 0.5% w/4% Floor
Term: 2 years
Amortization: Interest Only
Prepayment Penalty: None
LTV: 70%
Recourse
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Transaction Description
George Smith Partners secured the $1,820,000 acquisition bridge loan to purchase a 15-unit multifamily property in Los Angeles. Proceeds were constrained by a below market, in-place income. GSP sourced a Capital Provider who provided full proceeds and pricing that resulted in a below break-even going-in DCR of 0.8x. Lender required a 6-month interest reserve until property reached a DCR of 1.25. Sized to 70% of cost, the floating rate loan was priced at Prime +0.5%, adjusting daily for 2 years and is interest only for 2 years with no prepayment penalty.
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Managing Director/Principal, Gary M. Tenzer will be moderating a panel on the 2017 Financial Outlook, at the upcoming Connect Westside Los Angeles Conference on December 13. Panelists include industry experts and leaders in commercial real estate financing from construction lending, CMBS and crowdfunding. Conference registration is available online.
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George Smith Partners is placing non-recourse ground-up construction mezzanine debt, preferred equity and senior debt through a national portfolio lender funding from $3,000,000 to $50,000,000. Capital Provider offers flexible loan structures with terms between 1 year to 10 years and fixed or floating rate. Pricing starts from 12% with no restrictions on asset types or location nationwide for high leverage transactions to 90% of cost. In addition to the ground-up, bridge and permanent loans, programs also include a line of credit for qualified traditional or DST Borrowers.
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Treasuries seemingly have found a new level with the 10 year yield hanging in the 2.40% range for the last few weeks. Economic data (construction spending, unemployment, productivity, factory orders) has been bullish, giving the Fed “clear sailing” for next week’s rate increase. Last week’s employment report headline of 4.6% was tempered by a low Market consensus is a 0.25% increase. The closely watched elements will be the accompanying statement, the “dot plot” and Fed Chair’s press conference for the pace of future increases in 2017/2018. stay tuned
David R Pascale, Jr.
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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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© 1999 - 2024 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
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