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| Transaction Description: George Smith Partners successfully placed the 65% loan to purchase (67% loan to value due to a low appraisal) acquisition financing of a Pep-Boys auto repair store in New York State. The borrower acquired the property as the replacement property in a 1031 tax deferred exchange. The 20 year amortized term is fixed for 5 years at 5.0% prior to being recast for the second 5 year term at then prevailing rates. A step-down prepayment was structured to provide for future flexibility. |
| Challenge: With only 9 years remaining on the initial lease term, institutional lenders are leery of event risk on single tenant properties. The auto-bays added a specialty-use component to the collateral should the tenant not renew one year prior to the loan termination date. An environmental concern was also raised by a number of portfolio lenders polled. All borrower contingencies were removed to secure control of the property in what was a very competitive bid process. Certainty of close as applied for and timely execution was paramount to avoid severe tax consequences. The appraisal came in less than the purchase price, thus jeopardizing loan proceeds. |
| Solution: Mr. Stein quickly identified a local lender officed minutes from the property who immediately inspected and reviewed the property information. Their “in the market knowledge” gave a comfort that this location would quickly release to an identical user should Pep Boys vacate. A clean Phase I report mitigated all environmental concerns. A full credit committee commitment was issued within 24 hours of loan submission conditioned only upon 3rd party reports. Despite the low valuation, GSP worked with the lender to quantify lender risks for this cash-in execution and established a comfort level to extend their LTV constraint by an additional 2 percentage points. |
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| Rate: 5.0% Fixed for 5 Years |
| Term: 10 Years |
| Amort: 20 Years |
| LTV: 67% |
| LTC: 65% |
| Prepayment: 5,4,3,2,1 open |
| Recourse |
| Advisors: Stephen Stein, Teddy Stutz |
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