GSP Insights

  • Vaccine Optimism, Covid Surge, Stimulus Endgame

    Pascale’s Perspective

    December 2, 2020

    Britain’s approval of the Pfizer vaccine today means that shots will be given within days. The US is expected to approve vaccines by Pfizer by December 10 and Moderna by December 17, with shots being given by December 20. This optimism is tempered by record numbers of infections and hospitalizations nationwide going into winter. Various levels of stay at home restrictions, school closures and restrictions on businesses will continue for the next few months depending on the trajectory. US officials indicate that 100 million Americans will be vaccinated by March 1, with over 70% of the population. Congress is scheduled to adjourn for the year after December 11. The spikes in infections and hospitalizations combined with the expiration of unemployment benefits and eviction moratoriums on December 31 is putting enormous pressure on Congress to finally pass another stimulus bill. This week, a group of senators are circulating a $900 billion package that has bipartisan and bicameral support. Hopes are high but nothing is certain. The 10 year treasury hit 0.97% today, after starting the week at 0.83%. Stimulus and 2021 recovery hopes are contributing to the sell off. Traders are watching for it to hit 1.25% in the next few months which will put it right back to February 2019 levels. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Non-Recourse Multifamily Financing Starting at 3.35%

    Hot Money

    December 2, 2020

    George Smith Partners is working with a capital provider offering fixed rate financing for the purchase and refinance of industrial, office and retail properties in California, Nevada and Hawaii up to $20,000,000. With terms up to 10 years, this portfolio lender offers hybrid adjustable rate loans with fixed initial terms followed by an adjustable rate for the remaining life of the loan. Loan servicing is done in-house. A 60-Day rate lock is also available with a deposit and delivery of a fully executed rate lock agreement.

    For multifamily properties, the lender offers rates starting at 3.35%, 4,3,2,1 prepayment, 1.20x DSCR and 65% LTV for the five-year term. Seven-year loan maturities are also an option. The Lender will utilize the COVID payment reserve to make the monthly mortgage payments for the first 12 months of the loan term until the reserve account is fully exhausted. Unlike agency debt, there is no duplication of debt service payments.

  • Non-Recourse Permanent Financing

    Hot Money

    November 25, 2020

    George Smith Partners is working with a national balance sheet lender providing fixed-rate, long term permanent financing for stabilized property types including self-storage, industrial, apartments, and office/medical office in primary and secondary markets. The lender will also consider retail – grocery/drug anchor with more than 50% of tenants open/operating for loans from $4,000,000 to $25,000,000. With the ability to advance 65% of cost, pricing is in the low/mid 3’s for terms ranging from 7-10 years.

  • Treasury Yields and Markets React to Long and Short Term Covid News

    Pascale’s Perspective

    November 18, 2020

    Last week it was Pfizer and this week its Moderna: more positive news about the availability for a Covid vaccine. Pfizer is expected to apply for approval for emergency use of their vaccine as soon as this Friday, vaccinations will start this year. This hugely positive news is in contrast to the situation today: spikes in infections, hospitalizations and possible restrictions going into the holidays. Today’s announcement that the NY school system is closing and switching to remote learning rattled markets. The 10 year Treasury yield that nearly hit 1.00% last week dropped to as low as 0.84% today. Yesterday’s weaker than expected retail sales numbers also contributed to the drop in yield. The urgency of a “final” stimulus bill that can act as a bridge to the wide distribution of a vaccine is becoming apparent. Several cliffs loom at year end: federal unemployment insurance, student loan payment freeze, mortgage forbearance and eviction moratoriums. The hope now is for the lame duck congress to pass stimulus as part of the efforts to continue funding the government beyond December 11. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Non-Recourse Financing with Rates Starting at 4%

    Hot Money

    November 18, 2020

    George Smith Partners is working with a national private equity firm focused on debt and equity investment strategies. The capital provider will provide non-recourse, fixed rate financing starting at 4% with up to 80% of cost and terms up to 5 years for ground-up construction and construction completion on all asset types. Loan sizes go up to $500,000,000.

  • Vaccine Hopes Rally Markets, What’s Next for Real Estate?

    Pascale’s Perspective

    November 11, 2020

    Monday’s announcement of positive Phase 3 results from Pfizer’s vaccine trials caused one of the largest stock market rallies ever, which has continued throughout the week. The anticipated timeline for approval is this month. December – vaccinations for most vulnerable. January – vaccinations for first responders/health care workers. March/April – should be widely available. Experts such as Dr. Fauci and Sir John Bell are predicting life “returning to normal” by Spring 2021. Stay at home stocks such as Zoom saw values drop. Sectors including “return to normal” stocks such as tourism, airlines, movie theaters, theme parks rallied. Interest rates moved as the 10 year treasury jumped from 0.80% (Monday morning) to 0.98% as of today (look for 1.00% as a key technical level). The prospect of an “endgame” to the COVID crisis should theoretically return yields to their pre-COVID levels (10 year at about 1.50%). It will be interesting to see how this affects capital markets and lending criteria on the different sectors. Will next summer see consumers back to pre-COVID “normal”, ie. returning to indoor restaurants, movie theaters, gyms and traveling to crowded conventions? Lots of variables remain. For example, no one expects office occupancy to snap back to 2019 levels. The switch to work from home, either part time or full time, will remain for many workers. Lenders will be scrutinizing these trends when determining underwriting standards going forward. It’s definitely a game changer for hotels and retail. Owners in distress can now see their way to a better day. This may stave off the feared bloodbath of properties and loans being sold at bargain prices. Lenders typically reluctant to foreclose on properties will hopefully help existing borrowers get to a mid 2021 recovery. Of course, this brings the spotlight back to fiscal and monetary policy. Will there be a help for small businesses, tenants, homeowners, commercial real estate owners, etc? Congress is again sending signals that a stimulus will pass. Now the anticipated timing is before year end during the lame duck session. December 11 is the deadline to avoid a government shutdown. Stimulus could be baked into that. Hard to predict in today’s environment. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Non- Recourse Mezzanine Financing Behind Fannie Mae

    Hot Money

    November 11, 2020

    George Smith Partners identified a private commercial real estate finance company that provides non-recourse mezzanine financing for multifamily communities in primary and secondary MSA’s nationwide. Mezzanine loan amounts go up to $10,000,000 with terms up to 10 years and 1.10 DSCR on an interest only basis. With the ability to advance up to 85% of value/purchase, this lender offers fixed rate all-in pricing for stabilized or near stabilized multifamily properties (potentially in need of renovation not to exceed $5,000 per unit) a proven location, and experienced owner and management. Mezzanine debt must be placed at the time of the senior loan origination by this designated agency lender.

  • POST-ELECTION ECONOMIC OUTLOOK

    Webinar

    November 10, 2020

  • Markets Swing On Election Night Drama

    Pascale’s Perspective

    November 4, 2020

    Note to our readers: This column is not an endorsement of any candidate but is meant to discuss the capital market reactions to the post-election outcome.

    Much like 2016, yesterday’s US election and the continuing aftermath have led to market volatility as investors struggle to understand the results. Once again, the polls failed to predict the actual results. As votes were being cast yesterday, investors were assuming a potential “blue wave” with Democrats in control of the Presidency, Senate and House. Equity markets staged a “relief rally” on the certainty of a definitive result. Treasuries sold off. The 10 year Treasury yield spiked to 0.96% after hours as investors assumed passage of another big stimulus package and potentially other major federal spending such as infrastructure. This bet on big fiscal policy meant lots of new treasury issuance so a sell off occurred. As the results came in during the evening, it became clear that the House and Senate were going to be split and the Presidential result would be uncertain for a few days at least. This scenario put stimulus and infrastructure expectations in reverse. Combined with the uncertainty of the Presidential result, a flight to quality was underway. This increased appetite for treasuries and the yield dropped 20 bps to about 0.75% this morning. Wall Street traditionally likes a divided government as that provides certainty of no major policy changes. But this hope is complicated by the need for some stimulus to avoid a long drawn out recovery from COVID-19 pandemic. The anticipated lack of fiscal policy will now put added pressure on the Fed to provide continuing accommodative monetary policy. I would expect that Fed chair Powell will address this tomorrow at his press conference for the November meeting. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Seven Year Non-Recourse Bridge Financing

    Hot Money

    November 4, 2020

    George Smith Partners has secured financing with a national capital provider lending on transactions from $50,000,000 to $350,000,000 on a non-recourse basis. With a focus on Office, Multifamily, Industrial, Life Science and Self-Storage, this lender can provide up to seven years of bridge financing for senior loans up to 70% of capitalization. Subordinate leverage is available behind their senior for top MSAs. Pricing for senior loans start at LIBOR+300 bps and mezzanine loans start at LIBOR+675 bps.

  • “Risk Off” Trading Roils Markets

    Pascale’s Perspective

    October 28, 2020

    For months investors have been pricing in optimistic scenarios: another big stimulus package, COVID treatments and/or vaccines on the horizon. This week has seen massive stock market selling and treasury yields dropping (risk-off).

    Stimulus: Congress has recessed until after next Tuesday’s election with no deal. As analysts had “priced in” some pre-election stimulus, the market sell off was inevitable. So now the hopes for more stimulus are for the “lame duck” period. Trying to predict the likelihood of an agreement based on all the election variables is extremely murky (which party-parties will control the House, Senate, Presidency)? If the election results spur no action during lame duck, relief will not come until February 2021 at the earliest. We may see a “relief rally” next week if there is a good level of certainty surrounding the results. The need for stimulus is increasingly urgent as recent COVID developments are alarming. Another election variable is a disputed result scenario.  Spikes have occurred in Europe and the US as the weather turns colder. Even with promising late stage vaccine trials and approval possibly by year end, the path to “normal” is now predicted to last well into 2021. Dr. Fauci today put it in perspective as he opined that it will take several months to achieve anything close to acceptable herd immunity. This puts the onus back on Washington to provide fiscal policy. The 10 year treasury dropped 13 bps to about 0.75% over the past few days. It’s a good bet that treasuries and other indices will remain low as central banks crank up the purchases. The question for commercial real estate investors is what direction will risk spreads and loan underwriting criteria take going into 2021? By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Co-GP Looking for Projects

    Hot Money

    October 28, 2020

    George Smith Partners has a client seeking early-stage development projects that are in need Co-GP equity. Our Sponsor has substantial financial wherewithal and bandwidth for additional projects. They are a looking to develop projects with total project costs between $30,000,000-$100,000,000 in Boise, Dallas, Phoenix, Salt Lake, Denver, and San Diego.

Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here