GSP Insights

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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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    National Portfolio Financing for Stabilized Assets w/Bank Charges Waived

    Hot Money

    April 3, 2019

    George Smith Partners has placed several hundred million dollars of performing real estate loans with a national portfolio capital provider structured with no pre-payment penalty. Transactions in primary and secondary markets from $1,000,000 to $10,000,000 fixed for five or seven year terms. This recourse lender will advance to 75% of appraised value assuming a 1.25 DSCR on in-place cash flow. Most loans close within 60 days. Application fees and bank closing costs (excludes 3rd party charges) are waived on new opportunities for the next three months.

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    ECB Joins Fed, Not Quite Ready to Remove Accomodation

    Pascale’s Perspective

    March 27, 2019

    The 10 year Treasury hit 2.34% today, representing its lowest level since December 2017, as “capitulation” seems to be contagious amongst the major central banks. Last week our Fed and this week the ECB. Draghi comments sound familiar: not worried about inflation, sees growth risks and”substantial accommodation” was still needed to get inflation to their target levels (if ever?). Worldwide sovereign debt yields have plummeted. We are likely in a period of relative inaction by the central banks as they monitor the data. Interestingly, the 10 year Treasury (2.35%) is lower than 30 day LIBOR (2.49%) Regional bank stocks are being hammered due to the inversion of the yield curve, they can’t borrow short and lend long at a profit. But credit spreads are narrowing (corporates, CMBS, etc.), with lots of equity (funds, etc.) sitting on the sidelines. Even with debt costs at such a low level, deals need to pencil, income needs to increase in a low inflation environment. The news/data cycle suggests there is reason to believe in both safety (Negative news in Europe, fears of the slowing global economy) or risk (optimism about trade talks with China, full employment, wage increases) Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Non-Recourse Permanent Loan Program

    Hot Money

    March 27, 2019

    George Smith Partners is currently placing non-recourse permanent financing from $1,000,000 to $25,000,000+ for industrial, office, retail or mixed-use stabilized properties located in top MSAs. Lender has the ability to advance up to 50 – 55% of purchase price. The pricing is based on Treasury rates + 200 points and terms are 3, 5, 7 and 10 years with step down prepayment that is waived after 2nd year if refinanced again with Lender. There is no cost to the borrower for appraisal, legal, title, escrow or recording. An additional $500 credit at escrow if Borrower provides all due diligence within 7 days from signing LOI.

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    The Fed Tries to “Nail the Landing” (For Once), Yield Curve

    Pascale’s Perspective

    March 20, 2019

    Today’s Fed announcement and subsequent news conference by Chairman Powell made the recent “about face” official.   Not only did the Fed not raise rates today, it indicated (via the infamous “dot plot”) that there are NO increases planned for 2019.    In fact, futures markets now predict a rate cut before any future rate hikes.  The Fed is not afraid of inflation, between steady commodity and energy prices and consumer prices remaining flat, the old relationship between full employment and inflation appears to be officially broken (RIP Phillips curve).  Powell also spoke of slowing growth in the US, China and Europe.  As the effects of the tax cut wane, he noted “slower growth of household spending and business fixed investment”.  Today’s comments had the feeling of an economy in “balance” with Powell again indicating the present Fed rate is, “in broad estimates of neutral”, advocating for patience and (importantly) that the data does not justify a move in either direction.  Past Fed actions (rate increases during expansions) have been blamed for causing recessions and cutting economic rallies short.   Maybe things are different this time?  Maybe the lack of inflationary pressures are allowing this Fed to “stop and smell the roses” while the economy enjoys a plateau instead of a peak? Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

     

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    Unentitled Land Financing 85% LTC

    Hot Money

    March 20, 2019

    George Smith Partners is working with capital provider funding non-recourse senior bridge transactions from $1,500,000 to $50,000,000 with a focus on core infill locations within top growth markets across the United States. Leverage at 85% for unentitled or entitled land and existing asset repositioning projects. Rates for bridge loans start at 7.9% for fixed terms up to two years and flexible prepay.

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    The New Normal Goes On and On, Forever?

    Pascale’s Perspective

    March 13, 2019

    The “new normal” of low interest rates and central bank accommodations (quantitative easing, etc.) was supposed to end when the US and world economies got back on their feet. The “training wheels” could then come off. Recent developments continue to suggest that the training wheels may be on for a while. The Fed has been quite dovish lately with rate hikes on hold and announcements that the balance sheet reduction will end this year. Recent inflation data is very interesting: last weeks jobs report indicated the highest wage inflation in recent years. Today’s PPI report showed a 0.1% rise in producer’s prices and, very significantly, little or no inflation in the “pipeline” which predicts inflation over the next few months. The Fed watches wage inflation closely but will base their rate decisions on overall inflation, therefore, today’s report is dovish. Brexit and China trade agreement uncertainty is also weighing on markets, keeping yields low. The 10 year T hit a recent multi-month low at 2.59% yesterday and today is at 2.62%. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Mezzanine Financing for Affordable Housing

    Hot Money

    March 13, 2019

    George Smith Partners identified a private commercial real estate finance company that provides non-recourse mezzanine financing for the acquisition, renovation and development of multifamily properties (with at least 20% of the units classified as affordable) located in the Western U.S. The financing is structured as a tax-exempt private activity housing bonds or 501(c)(3) bond. They can be used on mixed use 80/20 projects, for non-profit corporations, can be subordinate to HUD and Rural Development Loans and can be repaid from the sale of tax credits. With the ability to advance 90% of mezzanine loan programs range from $5,000,000 to $15,000,00. Interest-Only pricing for Acquisition / Rehab ranges from 8% – 10%, compounded monthly and Development ranges from 10% – 12%, compounded monthly.

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    The “Old Normal” Remains Elusive – ”Not so Fast Taking That Punchbowl”

    Pascale’s Perspective

    March 6, 2019

    The plan was simple: central banks injecting massive liquidity into the system to bring the world out of the post crash doldrums.  The Fed’s dual mandate of low inflation and high employment would eventually force its hand as low unemployment would lead to increased wages and inflation (aka: a hallmark of the “Old Normal” called the Phillips Curve which posits a “stable and inverse” relationship between inflation and unemployment). During the past few years, it seemed like this scenario was taking hold as the Fed was telegraphing multiple rate increases, the ECB was winding down their stimulus, wage inflation was finally stirring, etc. But, recent developments indicate a slowdown in growth (recent forecasts for China, the US and Europe all trending lower), low inflation (the Fed’s inflation gauge, PCE, remains below the 2.0% target and oil prices unable to sustain recent gains) and very low unemployment still not moving wages significantly, especially for the low wage earners. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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