FINfacts™ XXIV – No.94 | November 15, 2017

MARKET RATES
Prime Rate 4.25
1 Month LIBOR 1.26
6 Month LIBOR 1.62
5 Yr Swap 2.09
10 Yr Swap 2.31
5 Yr US Treasury 2.04
10 Yr US Treasury 2.33
30 Yr US Treasury 2.84

RECENT TRANSACTIONS
$17,882,000 Non-Recourse TIC Refinance for 332-Unit New Mexico Apartments

Rate: 4.23%, Fixed
Term: 10 Years
Amortization: 30 Years
LTV: 70%
DCR: 1.25x
Guarantee: Non-Recourse
Lender Fee: Par

George Smith Partners arranged $17,882,000 for the refinance of a 332-unit garden-style apartment complex located in Albuquerque, New Mexico. GSP identified a capital provider that would accommodate the existing borrower structure, which was comprised of 7 TIC’s (Tenants-in-Common). Our Sponsor wanted to keep the existing organization structure in place due to potential tax implications that may have arisen with any changes. The Sponsor’s existing loan had a floating interest rate, which they wanted to convert to a fixed rate to eliminate any interest rate risk. Sized to 70% of value, the non-recourse loan is fixed at 4.23% with a 10-year term and a 30-year amortization schedule.

Advisors

Steve Bram
Managing Director & Principal / GSP Co-Founder
David R. Pascale, Jr.
Senior Vice President

$6,500,000 65% LTV Non-Recourse Grocery Anchored Shopping Center Refinance; Ten-Years Interest-Only

Rate: 4.09%
Term: 10 Years
Amortization: Interest Only
LTV: 65%
Guarantee: Non-Recourse
Lender Fee: None

GSP successfully placed $6,500,000 in ten-year fixed-rate first mortgage financing on a 78,000 square foot, 92% occupied 1980’s vintage shopping center located in a secondary Southwestern market. Approximately 20% of the collateral’s income is derived from a B+ rated (S&P) grocer in occupancy since 1980. The grocer recently exercised a renewal option through 2022. Sized to 65% LTV, the financing is full-term Interest only with a 4.09% fixed rate coupon, maximizing Sponsor cash flow and locking in an extremely low interest rate for the ten-year term. The loan is non-recourse with standard “bad boy” carve-outs to a Sponsor-affiliated LLC.

Advisors

Nick Rogers
Vice President

$2,500,000 Multifamily Acquisition Fixed @ 3.8%; 28 Day Close

Rate: 3.8% Fixed for Five Years
Term: 30 Years
Amortization: Interest Only, Three Years; 30 Year Amortization thereafter
DCR: 1.15
Rate Reset: L+225
Guarantee: Non-Recourse
Lender Fee: Par
Prepayment: 3,2,1 open

Transaction Description:
George Smith Partners placed the acquisition debt of a 14 unit Los Angeles County multifamily rental with an institutional portfolio lender. Fixed for five years at 3.8%, the non-recourse loan is interest only for the first three years before amortizing over a 30-year schedule. Prepayment steps down from 3% and is open without penalty for the remainder of the 27-year term. Due to a tight escrow timeframe, closing occurred 28 days after the term sheet execution.

Problems:
Our Sponsor went hard, non-refundable Day 1 and thus required certainty of execution. The seller was non-cooperative and refused to offer updated cash flows or rent rolls. Miscellaneous income (laundry, RUBs) was unverifiable with the statements provided. With a hard deposit, the seller was unwilling to allow for an escrow extension regardless of circumstances.

Solutions:
GSP targeted a known capital provider who is active in this multifamily segment and could underwrite market rate conditions in addition to offering a certainty of execution. A tighter DCR constraint and their ability to underwrite using the actual coupon in place of a stressed constant maximized loan proceeds. Third party reports were expedited and the credit file was submitted to loan committee upon receipt. Loan documents were streamlined for this non-recourse execution.

Advisors

Matthew Kirisits
Director

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HOT MONEY
National Portfolio Funding with Step Down Prepayment Penalties

George Smith Partners identified a national portfolio lender offering a permanent fixed rate structure with step down prepayment penalties. This capital provider offers 5, 7 and 10 (5+5 and 7+3 options) year fixed rate terms for multifamily, manufactured housing, office, industrial, retail, hospitality, and self-storage, up to 80% of cost/value for Multifamily and MHC and 75% of cost/value for the other property types with flexible levels of recourse depending on LTV and DSCR. Transactions range from $5,000,000 to $25,000,000+ for the program. Funding is underwritten using in place cash flow to a 1.25x DSCR.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasuries “Whipsaw” on Reports, Expectations

This past week has been pretty volatile for Treasuries. Last Friday was technically a holiday but trading still occurred. The 10 year T jumped 7 bps up to 2.39% as investors focused on (1) The progress of the proposed tax bill, ie. an increased supply of Treasuries next year due to expanding budget deficits and (2) An updated European GDP forecast indicating robust growth and increasing the possibility of an earlier than expected end to quantitative easing over there. Then Tuesday’s PPI numbers came in much higher than expected (0.4% vs 0.1%) indicating strengthening inflation. However, lower than expected growth numbers from China brought up global growth concerns and yields didn’t rise as much as they should have (however the 10 year hit 2.41% yesterday morning). Today’s CPI numbers were softer than expected, but still strong enough to add certainty to the widely expected December rate increase by the Fed. Note that the Fed’s preferred gauge of inflation, the PCE, is still under the stated target of 2.0%, the next release is Nov 30. The soft CPI and statements by some senators against the tax bill rallied yields down today back to 2.32%. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

If you have an inquiry regarding George Smith Partners’ commercial real estate financing, please contact your GSP representative or Todd August, Chief Operating Officer (310) 867-2995 or TAugust@GSPartners.com


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