GSP Insights

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    Tarriffs Dominate the Economic Landscape

    Up until last week, markets had priced in some kind of US-China trade agreement boosting the economy. The recent breakdown in talks, renewed tariff threats and potential escalation has caused major market volatility. Daily updates from both sides on the status of negotiations are drowning out the regular economic reports that typically set the agenda (unemployment, CPI, manufacturing indices, etc). The 10 year T dropped to 2.36% yesterday, it is testing a key technical lower level. Today’s report that China’s economic data has weakened before the implementation of tariffs reignited the “global slowdown” narrative as Europe also is stagnating. The Fed Funds market indicates a 70% chance of a rate cut this year.
    By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Non-Recourse Bridge Financing focused on Secondary and Tertiary Markets

    Hot Money

    May 15, 2019

    George Smith Partners is placing non-recourse bridge debt through a national portfolio lender funding transactions from $5,000,000 to $75,000,000. The Capital Provider offers flexible loan structures with interest only terms between 1 to 5 years and extension options. Floating rate pricing starts from LIBOR + 300. Lender has a strong appetite for manufactured housing, self-storage and hospitality along with four main asset types located in secondary and tertiary markets in addition to primary markets. Opportunities should be cash flowing day one (above 1.0x DSCR) and value-add in nature. Loans can be structured with no lockout and minimum interest of +18 months. Initial loan to cost can go up to 85%, as long as stabilized value and cash flow support 70% takeout level. Future fundings can be structured for capex and TILC costs.

    Lender also offers CMBS style loans on all asset types, primarily focused on Manufactured Housing, Self-Storage and Hospitality, loan sizes ranging from $2,000,000 to $25,000,000 with 5-10 year terms and 25-30 year amortization schedules. Typically capping max LTV at 70% for refinances, Lender has ability to structure mezzanine components (as small as $1,000,000) to get up to 80%-85% LTV. Senior Loans currently price in the 4.75% (10-yr loan) area with the Mezzanine components pricing in the 10% – 12% range depending on asset type and LTV of last dollar.

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    Non-Recourse Permanent Financing Starting at 3.69%

    Hot Money

    May 6, 2019

    George Smith Partners is placing non-recourse financing for permanent transactions up to $40,000,000 for properties in primary California coastal markets. Lender will finance office, industrial, grocery anchored retail, multifamily and self-storage. Lender will fund up to 55% of purchase price with terms up to ten years.

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    Zack Streit Explains Opportunity Zones on the Geraci Podcast

    Podcast

    May 2, 2019

    Zack Streit was a guest on the Opportunity Zone podcast with Kevin Kim of Geraci LLP. They give an overview of the impact OZ’s will have, the rules for capital gains after a 5,7 and 10 year hold, QOF fund structures and waterfall and JV best practices.

    Click here to listen and watch the podcast presentation.

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    “Transitory” Inflation Shuts Down Rate Cut Talk

    Today’s Fed announcement and press conference came in the wake of the latest Personal Consumption Expenditure report indicated a slowing rate of inflation (1.6% vs the 2.0% target). Which begs the “macro” question: Is the long standing (pre-crash) relationship between “full” employment and inflation broken? And if so, is it appropriate for the Fed to cut rates during a period of full employment? The Fed is in the spotlight with recent speculation and high profile pressure on them to do just that. The Fed did not cut rates today and Chairman Powell mentioned “transitory” factors artificially lowering the inflation stats. He cited anomalies in the calculation such as apparel prices (new methodology and unusually low prices) and financial services/portfolio management. This is reminiscent of Fed Chair Yellen’s discussion of “temporary” low cell phone fees dragging down inflation in early 2017. Powell also indicated “no reason to raise or lower the rate”, he may feel that we are at the long sought “neutral” rate and we are finally “there”(not everyone in Washington agrees). Stay tuned.
    By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Non-Recourse Permanent Financing Starting at 4.30%

    Hot Money

    May 1, 2019

    George Smith Partners is currently placing non-recourse small balance financing for commercial and multifamily properties with loan balances up to $10,000,000 in California. Lender has the ability to advance up to 70% of purchase price. The pricing is 4.30% and terms are 5 or 7 years with up to 3 years of interest only payments. The Lender can rate lock at application for 60 days.

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    Equity and Bond Markets Rally

    Pascale’s Perspective

    April 24, 2019

    This week saw a new all time high in the S&P followed by a big drop in Treasury yields. Huh? Are we in “risk-on” or “risk-off” territory? Maybe it’s a case of stocks rallying on earnings reports and the tail end of buybacks stemming from the tax cut. Meanwhile, bonds are rallying on recent news forecasting a potential slowdown in the world’s major economies. The 10 year T is at 2.53%. Today’s bond market rally was fueled by a weaker than expected German sentiment, Australian price index very flat with their central bank poised to cut rates, a moderating of oil prices. US Treasury yields are low partially due to the relative value of other major industrial nations yields (many of which are negative or below 1.00%). Futures markets indicate no rate increases but rate cuts. It feels like a continuation of a “Goldilocks” period where many major developments are multifaceted and not entirely positive or negative. Example: the China-US trade talks. A deal seems likely (positive) but the details will probably lead to continued conflict in years to come as not all of the issues will be settled cleanly. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Mezzanine and Preferred Equity Up to 90% LTV

    Hot Money

    April 24, 2019

    George Smith Partners is working with a national lender offering preferred equity programs for all property types ranging from $15,000,000 to $50,000,000 in primary and secondary markets. With the ability to advance 90% of purchase price for Mezzanine and Preferred Equity, pricing starts at LIBOR + 600 with floating rates up to five years. The lender offers a flexible prepayment structure and future funding.

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    Nationwide Cannabis Financing 75% of Cost

    Hot Money

    April 17, 2019

    George Smith Partners is working with a capital provider financing cannabis loans up to $40,000,000 nationwide. With terms from 12-36 months, this lender has the ability to advance up to 75% of cost based on underwritten values and can close in under three weeks.  Pricing is from 9% to 12% for retail, distribution centers and bio-science/manufacturing properties in primary and secondary markets.

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    “Static” Low Rates Bringing Borrowers Back to the Table

    Pascale’s Perspective

    April 10, 2019

    Several fixed rate lenders (agencies, Life companies, CMBS) have indicated that the recent drop in fixed rates is spurring increased activity in refinances and acquisition loans.    It’s another “perfect storm” as fears of a global growth slowdown and lack of inflation are keeping treasury rates low and a general “risk on” trade is contributing to relatively tight credit spreads.   Note that spreads have increased slightly in recent weeks in reaction to the lower index, but the increase is more than offset by the drop in Treasuries.   One of the main factors keeping Treasuries low is the abating fear of inflation.   Remember last November, when “inflation was coming back” and a 3.23% 10 year Treasury was just a signpost on the way to 4.00%?   That is now ancient history.   Today’s headline on the CPI report indicated 0.4% monthly headline inflation but markets focused on the 0.1% “core” number excluding the volatile food and energy sectors (but isn’t that the stuff everyone buys? Food and gasoline?)   Regardless the remaining core number may be slightly skewed lower due to new methodology on apparel prices.   The 10 year T is at 2.46%. Stay tuned.
    By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Non-Recourse Bridge & Mezzanine Financing up to 85% LTV

    Hot Money

    April 10, 2019

    George Smith Partners is working with a national capital provider funding non-recourse bridge and mezzanine debt to 85% of value. The Lender offers flexible loan structures with interest only terms up to 6 years (inclusive of extension options) for transactions from $10,000,000 to $75,000,000. Floating rate pricing starts at LIBOR + 275. The Lender has a strong appetite for Multifamily, Office, Industrial, Retail and Hospitality properties located in primary, secondary and tertiary markets.

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    Fiscal Stimulus Fades, Monetary Policy is Taken For Granted, Time for a Trade Deal?

    Pascale’s Perspective

    April 3, 2019

    After Treasuries hit a recent low last week due to Fed and ECB committing to low rates for the time being, markets jumped on Monday as the US and China both exceeded expectations with robust manufacturing reports. The China report was especially well received as it helped assuage global growth concerns. However, today’s ADP employment report indicated that US companies added the fewest workers since March 2017, steepest drop in construction jobs since 2012. It could be an anomaly (seasonal, weather) or a sign that the long hiring boom is slowing as the effects of the tax cuts wear off. So if the big fiscal policy effects are waning and interest rates seem to be low but static, what is the next jolt for the economy? It may be that 2 long simmering issues may be “solved” soon: US – China trade agreement and a softer Brexit. Treasury yields increased today after the disappointing jobs report. Either traders are waiting for Friday’s major employment report or were looking ahead to the trade deal? The 10 year is at 2.52% with all in 10 year loan rates in the 4.00% – 4.50% range. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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