GSP Insights

George Smith Partners has identified a capital provider financing up to 90% of cost for home builders who are switching strategies from ‘for-sale’ to rental. Pricing starts at SOFR+400 and is non-recourse for properties nationwide. This program allows home builders to continue financing construction on their bank revolvers while aggregating rental units using the capital provider’s credit facility. 30 month initial term with extension options, this lender can finance up to $50,000,000.

George Smith Partners has identified a capital provider that specializes in quick close bridge financing. With the ability to close in under 5 business days, this lender provides financing up to $45,000,000. Typical terms are one year with extension options up to 70% leverage. This program encompasses all asset types, nationwide.

George Smith Partners is working with a capital provider financing construction loans up to 70% of cost. Lending on all asset types with a focus on multifamily, mixed-use, industrial, warehouse, and storage, fixed rate pricing starts at 9%. For transactions from $10,000,000 – $75,000,000, terms are up to 36 months with extension options. This capital provider lends in primary and secondary markets nationwide and also provides bridge and mezzanine financing.   

George Smith Partners has identified a capital provider financing value-add bridge loans up to 80% of cost. For multifamily, industrial, and hospitality assets, loan amounts range from $5,000,000 – $65,000,000. With pricing starting at SOFR + 2.75%, terms are interest only and non-recourse. This capital provider lends nationwide and offers terms up to 60 months with open prepayment.

George Smith Partners has identified a capital provider with a non-recourse participating construction program funding up to 75% of cost for multifamily & industrial projects in major MSAs only.

 

This week’s data and treasury market reaction are significant for 2 reasons: (1) It’s been 2 weeks since headlines regarding the banking crisis and (2) Employment reports this week may be indicating loosening labor demand. In the last year, the Fed has become increasingly concerned about job openings vs unemployed workers as the usual survey data (JOLTS, etc.) showed a ratio as high as 2 to 1. As major corporate layoff announcements have been occurring multiple times a week and real time data from private job listings (indeed.com, Zip Recruiter, etc.) show plummeting job postings, many analysts feel that the Fed was looking at lagging data. The phrase “zombie job postings” and reports of skewed survey results imply that the official data is lagging. Monday’s data indicated continuing contracting in manufacturing (ISM). Tuesday saw job openings (officially) fall 700,000 to below 9.9 million- the lowest in 2 years and a lower than expected job creation number. Today’s jobless claims continued the narrative with higher applications both now and upwardly revised over the past few months (based on updated methodology). Will the Fed possibly realize that they have already raised rates enough to loosen the labor market? Tomorrow’s monthly major unemployment report might shed more light. 10 Year treasuries rallied down to 3.29%.

As systemic banking issues have receded from the headlines, the issues are not solved. The Real Estate Roundtable’s recent letter to the FDIC and the Federal Reserve highlights the issues and suggests some solutions. It notes that recent interest rate moves by the Fed have stressed bank balance sheets as treasuries and MBS are now worth less. There is $1.45 trillion in looming commercial and multifamily debt maturities in 2023-2025- banks and thrifts hold just over 50% of total CRE debt. The letter requests the establishment of a TDR (troubled debt restructuring) program that will encourage regulators to allow loan modifications during times of economic instability. This will avoid Banks being “forced” into foreclosing and/or putting sponsors into default due to restrictions on their ability to modify loan terms. Banks are also asking for increased deposit insurance which will put them on equal standing amongst depositors with the “TBTF” money center banks. The combination of increased depositor confidence and balance sheet flexibility could be part of a solution. Stay tuned…

George Smith Partners is working with a capital provider financing build-to-rent projects up to 80% of cost and 75% of value. Loan sizes range from $3,000,000-$50,000,000, non-recourse with carve outs and up to 36 months of term in select markets.  Please reach out to inquire about this capital provider. 

George Smith Partners has identified a capital provider financing bridge loans starting at SOFR + 3.25%. With a minimum loan amount of $30,000,000, terms are up to 7 years, interest-only, and non-recourse. With a focus on the top 20 MSAs, asset types include multifamily, industrial, select service hospitality, SFR, manufactured housing, and self-storage. This lender also offers mezzanine and preferred equity financing up to 85% of value with pricing starting at SOFR + 3.75%.

George Smith Partners has identified a capital provider financing bridge loans up to 80% of cost from $2,000,000-$100,000,000. Terms are interest only, range from 1-5 years, and are non-recourse. Floating rate pricing starts at SOFR + 400 with no interest rate cap required. Fixed-rate pricing starts at 6.50% with a 12-month yield maintenance. Lending to primary and secondary markets nationwide, this lender can close in as little as 1 week for all asset types.

The Silicon Valley Bank and Signature Bank collapses set off a week of wild volatility, market fear (risk-off), massive new rescue facilities from governments and money center banks, and the dust hasn’t settled. The events have also sharpened the divide between the “Too Big To Fail” money center banks and the regional banks. The TBTF banks have more stringent capital requirements and are in better shape to withstand volatility. The latest attempt (announced today) to stabilize First Republic Bank involves 11 major banks depositing $30 billion in FRB as a sign of confidence. This is on top of Sunday’s announcement of the Bank Term Funding Program (BTFP) which allows banks to borrow against their portfolio of secure bonds (Treasuries/MBS/Fannie and Freddie Securities) at par (the original price) and not today’s mark to market value (less than the original price due to rate increases). This is a critical facility as the Fed’s rapid rate increases have left many banks in a potentially illiquid position. Banks bought Treasuries in 2019-2022 while prices were high and yields were ultra low. Depositors poured money into banks during this low rate environment. The spike in Treasury yields over the past year drained deposits out of banks and into Treasuries, Money Market Funds, etc – and left Banks in a cash poor position while holding devalued collateral. This week has also seen a $50 billion rescue facility implemented by Switzerland’s central bank for Credit Suisse, a major international bank twice the size of SVB. Today has been the calmest day in markets since the SVB collapse last Friday…

What about next week’s Fed Meeting? Next week’s Fed meeting will present a conundrum for Powell and friends. Today is the one year anniversary of the first rate increase of this cycle of hikes. The Fed has spent a year tightening financial conditions, draining liquidity from the system, etc. Their intent was to pressure Main Street (employers, consumers, retailers, etc.), but their measures are now putting pressure on the financial system. Will the “cracks in the system” possibly spur the Fed to pause the increases at next Wednesday’s meeting? Maybe the focus should be on a suspension of Quantitative Tightening. The Fed is selling/rolling off $95 billion of bonds a month. Remember that the Fed was purchasing $80 billion of bonds per month last March. The selling devalues bonds while draining liquidity out of the system. The recent data (CPI as expected, PPI deflationary) may give Powell enough breathing room to “talk tough and pause.” Another possibility: Acknowledge financial market stress (“We’re monitoring it closely”), raise rates 25 bps and stop QT completely (or even start QE again?). Stay tuned…

By David R. Pascale, Jr., Senior Vice President at George Smith Partners

George Smith Partners has identified a capital provider financing construction projects up to 90% of cost. Loans range from $25,000,000- $150,000,000 and are non-recourse for up to a 36-month term. Lending nationwide, pricing starts at SOFR+600 and can close in under 60. Fixed pricing is also available with interest only during the initial term. This lender also provides bridge financing for most asset classes including self-storage, condos, hotels, and SFR.

George Smith Partners has identified a capital provider financing bridge loans starting at SOFR + 350 for loan amounts $20,000,000 and up. With leverage up to 65%, this lender does not require interest rate caps. While this capital provider does not finance ground up construction or land, they will provide financing for properties pre-TCO. This program is suited for properties that are within the 4 major property types and located anywhere in the US west of Colorado.