GSP Insights

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    Homebuilding & Residential Development Equity

    Hot Money

    March 6, 2019

    GSP is working with an established equity source with a nationwide platform offering joint venture equity, preferred equity and mezzanine financing. Product types include for-sale homebuilding (single family, townhouses, condos), land development, build-to-rent and other residential related investments. The capital group is currently seeking opportunities with experienced builders and developers. Target investments range from $8M per deal and $25M programmatic joint ventures.

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    Interesting Testimony Today (Not “That” Testimony)

    Pascale’s Perspective

    February 27, 2019

    Was anyone watching the congressional hearing testimony from Fed Chair Powell or US Trade Representative Lighthizer? Powell highlights: Policy is “in the range of neutral”. Wow, the turnaround is complete on “where we are”. Remember early October when he spooked markets by saying we are “a long way from neutral”? Note that the Fed Funds rate was 2.25% at that time, speculation was the target neutral rate was somewhere between 3.25-3.50%, so the expectation was for at least 4 more hikes in the next year or two. Now, we are “there” which indicates the Fed feels no urgency to hike and is watching the data (unemployment and inflation). But today also showed a subtle shift in Fed concerns: financial market volatility, not usually a part of the stated Fed mandate. As Bloomberg pointed out, this concern for market stability is reminiscent of the “Greenspan put”. These developments are contributing to overall bullishness in Treasuries, the 10 year T is at 2.67%.  Meanwhile, across the hall, Trade Representative Lighthizer tamped down some of the recent anticipation of an imminent trade deal with China, which was heightened in recent weeks with the extension of the March 1 tarriff deadline and talk of a signing ceremony in the US soon. He indicated hurdles remain, so it may be a while. This “bad news” of course helps the contrarian bond market. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Fixed Rate Capital for Land Loans

    Hot Money

    February 27, 2019

    GSP is working with a capital provider that will provide recourse fixed rate financing to 75% of cost (90% + on build to suits) including, acquisition, improvements, development, pre-development, discounted payoffs, bankruptcy exit, purchase of notes and cash-out. Fixed rate pricing starts at 9% for terms up to 1 year with extension options up to 3 years for Multifamily, Office, Industrial, Retail, Special-Use, Entitled Land and Construction. Loan sizes range from $1,000,000 to $10,000,000 for transactions located in California, Arizona, Nevada, New Mexico and Washington.

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    Markets Usually Don’t Like Uncertainty, But Today They Do

    Pascale’s Perspective

    February 20, 2019

    The old maxim about financial market aversion to uncertainty is well known. However, today’s unusually newsworthy release of Fed minutes from January saw markets cheering uncertainty. It seems that the Fed’s “dot plot” indicating two planned rate hikes in 2019 is by no means set in stone (note that previous dot plots indicated three rate hikes in 2019). As I discussed last month, the futures market has been skeptical of the dot plots. That predictive market has been indicating a probability of zero hikes in 2019. Today’s Fed minutes release put the matter to rest (for now) as a majority of the participants are uncertain about any future rate hikes this year. The statement cited an uncertain atmosphere of risks to economic growth and very little concern about inflation. Of course there is a contrarian aspect to all of this: stocks and bonds rallied based on a more pessimistic outlook on the economy. Very significantly, the Fed addressed the “elephant in the room”, their huge balance sheet and its ongoing program to reduce holdings by selling bonds as they mature. Today’s minutes also showed participants broadly agreeing to announce a plan to stop balance sheet reduction later this year. This is a paradigm shift. It seems the Fed is planning on retaining a very large balance sheet on a near permanent basis. All of this helped drive the 10 year T yield down to 2.64%. With fixed rate loan spreads for agency, CMBS, LifeCo, etc ranging from about 130-200 depending on property metrics and leverage, all in rates range from 4.00% to 4.60% approximately. Again, its not too late to lock in historically low fixed rate financing. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    5.5% Fixed Rate Bridge Starting at $3mm to 80% LTC Funding Below Break-Even Coverage

    Hot Money

    February 20, 2019

    George Smith Partners is placing non-recourse financing for debt sponsors nationwide on all major property types. With transactions sized from $3 million to $20 million for fixed rate bridge w/sub 1.0 cash flow, pricing starts at 5.50% for terms up to five years with flexible yield maintenance and up to 80% of cost. Pricing for floating rate transactions start at LIBOR + 325. Transactions go up to $50 million with terms up to five years and up to 85% of cost.

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    Nationwide Non-Recourse Bridge Financing with No Prepayment Penalties

    Hot Money

    February 13, 2019

    George Smith Partners is placing non-recourse financing for reposition transactions from $3,000,000 to $15,000,000 on light to heavy value-added properties nationwide. This institutional lender will finance Industrial, Retail, Office, Multifamily, Self-Storage, Student Housing and Medical Office. Lender will fund up to 80% of purchase and 100% of good news dollars with terms up to three years for transitional assets with no prepayment penalties and no LIBOR cap required.

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    Deadlines Loom, Securitization Markets In Gear

    Pascale’s Perspective

    February 6, 2019

    The 10 year Treasury yield has settled into a range of about 2.65-2.75% in recent weeks as the “Goldilocks” outlook is in vogue: not too hot, not too cold: the economy is strong with potential headwinds and slowing growth with little inflation. With the shutdown now over (for now), Washington deadlines are in the spotlight: February 15 to pass another funding bill, March 1 to finalize a trade agreement with China (or big tariffs ensue), and very important is the March 1 reinstatement of the debt ceiling. This means that the government will have a few months of financial manipulation before defaulting on US Treasury debt. Now comes word that the debt ceiling extension may be rolled into the government funding talks. CMBS/CLO: Floating rate securitizations are going very well after a post crash record 2018 of issuance, some originators are cutting spreads accordingly. The first 2019 CMBS securitizations are pricing soon, but pricing talk is optimistic, about 5 bps inside of the final 2018 pools. Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Non-Recourse Bridge Financing 85% of Cost

    Hot Money

    February 6, 2019

    George Smith Partners is placing non-recourse bridge debt, mezzanine debt, and preferred equity to 85% of cost through a national portfolio lender funding transactions from $2,000,000 to $15,000,000. 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 + 325. Lender has a strong appetite for Multifamily, Office, Industrial, Retail and Hospitality properties located in primary, secondary and tertiary markets.

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    “Patience” is a Virtue

    Pascale’s Perspective

    January 30, 2019

    The Fed’s unanimous decision to not raise rates today and subsequent comments from Fed Chair Powell set markets soaring. The “contrarian” dynamic is alive and well: The Fed delivered “bad” news (the case for raising rates has “weakened” due to global growth concerns such as Brexit, China’s economic slowdown, etc.) and markets cheered as that will keep rates from rising. Interestingly, the Fed asserted its independence, denying they are bowing to political pressure and insisting these moves are “data dependent”. An unprecedented separate statement on the balance sheet seemed to be a nod to the market concern that “quantitative tightening” (the gradual selloff of Fed assets such as Treasuries and Mortgage Securities) is not on “autopilot” but is also data dependent. Futures markets now predict no new rate increases this year and even a rate decrease for next year. The 10 year yield dropped to 2.67%, nearing its recent bottom of 2.56%….Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    National Specialty Bridge & Ground-Up Construction Lender to 80% of Capitalization

    Hot Money

    January 30, 2019

    George Smith Partners is working with a national provider funding fixed and floating rate bridge loans from $7,000,000 to $65,000,000 and pricing between 600-900 over LIBOR on a non-recourse basis. With terms from 12-36 months, this lender has the ability to advance 80% of purchase price for new acquisitions, renovations, restructuring, partnership buyouts, construction and special situations. Asset types include Multifamily, Office, Retail, Industrial, Warehouse, Mixed Use, Manufactured Housing, Self-Storage, Senior Housing, Student Housing, Medical Office and Commercial and Residential Land.

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    Government Uncertainty May Roil Markets

    Pascale’s Perspective

    January 23, 2019

    The longest Government shutdown in history is by definition “uncharted territory” and may push markets. Potential effects that may begin to “pile up”: no economic reports for markets to interpret, federal agency causing slowdowns in economic activity (TSA, USDA inspectors, etc), consumer/business confidence erosion, potential global investor impatience and avoidance of US dollars/treasuries (ugh! – especially if the shutdown begins to affect the upcoming debt ceiling debate). With no end in sight, the only “ray of light” from Washington has been a potential trade deal with China (who seems to need to make a deal). The 10 year T seems to have settled in a range of 2.70-2.80 lately, today at 2.75%. CMBS: With no pool having been securitized since before Christmas, originators are slightly “flying blind” looking for a level to price off of. Whisper talk on upcoming pools indicates some narrowing may be in the cards (AAAs at Swap + 95 as opposed to over 100 in December). All-in rates for full leverage loans is right about 5.00% (again). Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Co-GP Equity Provider Offering Financing for JV’s During Predevelopment

    Hot Money

    January 23, 2019

    George Smith Partners is working with a Co-GP equity provider for multifamily, condominium, office, hospitality, mixed-use, retail, student housing and industrial sectors. The capital provider will enter into joint ventures during pre-development periods and will take entitlement risk. They can be used to provide equity for ground-up development, build-to-core, asset repositioning, distressed construction projects and non-performing construction loans. Looking for value-add and opportunistic ground-up opportunities in top 25 markets nationwide. Target equity investments between $15-$50+ million for total capitalizations north of $100 million ranging from 50% – 90% of the required GP equity. A construction completion guarantee will be provided where their GC is project managing.

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