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GSP Insights

  • 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.

  • Non-Recourse Bridge Financing with Rates Starting at 6%

    Hot Money

    October 21, 2020

    George Smith Partners is working with a national capital provider funding non-recourse bridge debt to 70% of total cost. The Lender is looking for true proforma based underwriting with a strong appetite for multifamily, industrial and cash-flowing senior living properties. The Lender offers fixed rate pricing starting at 6%, flexible loan prepayment structures with terms up to one year for transactions from $20,000,000 – $100,000,000.

  • Treasuries Spike on “Real Progress” Towards Stimulus Deal

    Pascale’s Perspective

    October 21, 2020

    Stop me if you have heard this before, but stimulus talks have taken on new urgency with a potential agreement in the next few days. The question now is if the votes to approve will take place before or after the election. The talks have taken on new urgency as jobless claims increase, highly publicized layoffs by large companies, an anticipated spike in COVID infections, etc. Equity markets have rallied and treasury yields have spiked based on the expectations of an agreement. The 10 year treasury is at 0.82%, the highest level since June. Note that the 10 year Treasury dropped as low as 0.31% in March during the initial COVID crash. Other factors contributing to the rise in yields are the Federal Reserve’s decision not to implement “yield curve control” (meaning the Fed would buy enough Treasuries to keep long term rates at a certain level) and the huge supply of Treasuries (due to the US budget deficit). Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Treasury Yields Drop, CRE: Focus on Office and Location Pandemic Trends

    Pascale’s Perspective

    October 14, 2020

    The 10 year Treasury was flirting with 0.80% last week about 15 bps above its recent average level. Interestingly, vaccine concerns led to a 5 bp drop to 0.72%. Reports from J&J and Eli Lilly regarding delays in progress on COVID vaccines and treatments reminded investors that the road to “normal” is bumpy. This leaves Pfizer and Moderna as the only two major vaccine candidates to have any chance at approval by year end. These developments remind us that regarding commercial real estate, any return to pre-pandemic normality will be well into 2021 and many changes may be permanent. A recent analysis by Cushman and Wakefield predict an increasing of office vacancies well into 2022 with a return to pre-COVID levels being achieved in 2025. The work-from-home movement has been accelerated by COVID: permanent at home workers increased from 5-6% pre-COVID to 10-11% today. The “hybrid” worker is on the rise. Pre-COVID hybrids accounted for 35% of office workers. Today this number is 50%. The hybrid worker splits working time between the office and home.

    Another major trend is affecting the real estate mantra “location, location, location”. The pre-pandemic location trend was driven by urbanization and densification around downtown cores of major cites. As mentioned by Peter Grant in today’s WSJ, the urbanization trend is being reversed. Downtown offices and attractions are less alluring to residents today. This has led to a flight to the suburbs and other secondary locations, as residents seek more space. This is not expected to “snap back” with the availably of a vaccine. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

  • Bridge, Construction and Permanent Funding During COVID

    Hot Money

    October 14, 2020

    George Smith Partners is currently originating and closing fixed rate loans for bridge, permanent, and construction projects with an institutional portfolio lender. The capital provider offers aggressive pricing starting at 3.50% for 3- and 5-year terms, Interest Only and up to 70% LTV for multifamily properties. This lender has a strong appetite for medical offices and owner-occupied, multi-tenant and credit tenant industrial properties. Investor owned commercial real estate rates start at 3.75% and can go up to 60% of value.

  • Zack Streit Recognized in Real Estate Forum’s 50 Under 40

    In the Press

    October 8, 2020

    As SVP of George Smith Partners, Zack assists sponsors in capitalizing their institutional-level deals. Streit has arranged and closed more than $1B and has underwritten more than $6B od debt and equity financing for an array of transactions. In 2019, he notably co-brokered the $460 million non-recourse senior construction financing for a Ritz Carlton Hotel, Residences and Offices development in Portland, OR, which served as the company’s largest transaction to date and the third largest construction loan in the country when it closed last year.

    The full article can be found here: https://www.reforum-digital.com/reforum/october_2020?folio=16&utm_source=newsletter&utm_medium=email&utm_campaign=TXREFO201005003&utm_content=gtxcel&pg=28#pg28

  • Non-Recourse Bridge Lender – Closed 5 Deals During COVID

    Hot Money

    October 7, 2020

    George Smith Partners is working with a non-recourse capital provider who is actively funding bridge loans from $15,000,000 to $250,000,000. The portfolio lender will fund up to 85% of value with a focus on Residential (Condo/MF/Student), Retail, Office, Vacant Land and Hospitality properties in primary, secondary and tertiary markets nationwide. Rates start at 6.5%+ and terms up to four years, the program highlights include no prepayment and interest only. Decision making is flat, and they can close as fast as one week depending on deal structure.