GSP Insights

  • LP Equity Provider

    Hot Money

    June 5, 2019

    GSP identified a LP-Equity provider for retail, office, industrial and self-storage. Looking for opportunistic opportunities (mostly 80/20) in primary and secondary markets nationwide. Target equity investments between $1 – $5 million per deal with an investment period of two to five years.

  • Wordwide Bond Yields Plummet, 10 Year T at 2 year Low

    The “risk-off” trade accelerated this week as the US-China trade rift accelerated with ever more heated rhetoric. The recent threats by China to limit exports of critical rare earth minerals fueled stock market selloffs and helped drive investors into “safe haven” government bonds. The 10 year T hit a low of 2.21% today, a near 2 year low. Japanese and German 10 year bond yields are negative, so again, the US is trading at a yield premium. The 3 month Treasury yield is a full 10 bps higher than the 10 year yield, a case of extreme partial yield inversion, often a harbinger of a recession. CMBS spreads are widening in the secondary market by about 6-8 bps on AAA paper with further widening in the lower tranches. Life companies may institute higher floor rates. All-in loan rates are still strong as they are benefiting from lower indices (being driven by anticipation of future slowing) along with spreads still hanging tight as present economic conditions are still relatively strong. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Non-Recourse Hotel Financing

    Hot Money

    May 29, 2019

    George Smith Partners identified a direct hotel financier funding permanent hotel bridge, mezzanine loans and preferred equity investments secured by hotel assets for acquisitions, recapitalizations, cash-out re-financings, PIP/Renovations, Conversions and Construction Takeout and Partner Buyouts. Their focus is for Premium/Select Service branded Hotels with 250 keys or less. Permanent financing up to $50 million; fixed for 20-30 years at 4.5%-6.5% with terms up to 10 years and leverage up to 80% of cost. Bridge debt to $50 million; fixed or floating at 6.0%-9.0% with terms to 5 years and 85% of stabilized value. Mezzanine tranches to $10 million; rates from 12%, Interest only or matched to senior loan. Leverage is limited to 85% of value. JV Equity available for Opportunity Zone projects and Preferred Equity to $10 million; rates between 13%-20% to 95% of cost. There is no participation for the Pref Equity once their returns are realized.

  • Fed Minutes are Already “Old News”, Credit Spreads Steady

    Today’s Fed Minutes release indicates Fed officials’ continued comfort level with the status quo on interest rates. It has the feel of a “victory lap” as rate policy, inflation and growth all seem to be in balance (for now). The minutes reveal the board’s feeling that there is less risk and uncertainty regarding Brexit, global economic outlook, etc. Note that the minutes were taken 3 days before the recent tariff escalations and breakdown in trade talks. With this new uncertainty (and some predictions of a long drawn out trade war with a permanent reordering of the relationship of the world’s two largest economies), a possible rate cut is more likely than an increase. Again the term “idiosyncratic factors” was used to describe the low inflation numbers, suggesting that there is a higher “normalized” inflation rate lurking in the data (but still not high enough to warrant Fed actions such as a rate increase). The 10 year T is at 2.39%. Now that indices have dropped and spreads remained tight, there has been an uptick in lending and issuance of debt backed securities (Fannie, Freddie, CMBS, CLO, etc). Spreads are widening slightly in the secondary market, but lenders competing for business are holding spreads tight, taking less margin for now. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • 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

  • 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.

  • 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.

  • 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.

  • “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

  • 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.

  • 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

  • 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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