TRANSACTION OF THE WEEK!
$8,350,000 -- Phase II of $20,350,000 Reposition Financing for Eastmont Mall in Oakland: GSP arranged $10,500,000 for Phase I plus a $1,050,000 earn-out back in 1997 & 1998. The mall is in the midst of a multi-year reposition. Eastmont is an 800,000 s.f., 30 yr. old mall on 32 infill acres plus a 4-story/25,000 s.f. office bldg. and a 20,000 s.f. vacant police facility. Borrower purchased the property as an REO in 1995 with the mall 46% leased and the office building virtually vacant. Rather than trying to attract national retail tenants he envisioned a combination of housing, community services, entertainment and local retail to serve the community needs. The new financing is for the major rehabilitation of 85,000 s.f. leased to the County of Alameda: (1) 65,000 s.f. job training/placement center and (2) 20,000 s.f. health services office. In addition to the Phase II funding, the lender also extended the term of the Phase I financing another 12 months. Both loans are co-terminus. Terms: (1) Rate: 6 Month LIBOR + 3.50%; (2) Term/Amort: 2/25; (3) Overall LTV: 75% of present value, 62% of projected stabilized value; (4) DCR: 1.30; (5) Prepayment: 1.0% "breakage" fee; (6) Lender Fee: 1.0% (Robert R. Stewart)
$6,300,000 (85% of cost) Construction Financing for 129,000 s.f. Self Storage: The 3-story, 780 unit facility is in prime location with freeway signage (traffic counts: 60,000 street/250,000 freeway). The market is underserved by its present facilities, with one square foot of storage space per capita (industry standard for saturation: 4-6 ft per capita) . The structure will feature state of the art elevators, high gloss metal roll up doors and extensive landscaping. Our client is an experienced owner/operator of self storage properties with over 25 years experience. GSP arranged 85% of cost construction financing with a local bank who agreed to limit recourse after C. of O. Terms: (1) Rate: Prime + 1.25%; (2) Term/Amort: 30 months/interest only plus two 6- month options; (3) Lender Fee: 1.0% (George Smith, Henry Bryan)
$1,614,000 for 96 unit apartment complex with $250,000 cash out: This complex built in 1971 features five 2-story buildings in a garden style layout complete with pool, spa and common BBQ area. The subject contains 62 2-BR, 31 1-BR, and 3 3-BR units. Third party costs were limited to $9,500 including appraisal, legal, environmental, structural/engineering. The subject was funded by a CMBS lender’s small loan program. (1) Rate: 10 year T + 2.15%; (2) Term/Amort: 30/10; (3) LTV: 65% (4) DCR: 1.20; (5) Non recourse; (6) Lender Fee: Par (7) No lender survey requirement. (Gene Brunkhardt)
T’s Run Up and Spreads Widen – Bad Week For Fixed Mortgage Rates
10 yr. T up to 5.90% on strong ECI (employment cost index) and personal income economic reports indicating inflationary pressures on wages. An extended period of low unemployment and low inflation may be coming to an end. Many economists feel that this relationship has been offset by rising productivity, but is not sustainable over the long term. Adding to the pressure is the exceptionally large bond calendar and "bond buyers playing chicken with Wall Street". A meltdown like last year…probably not. Indigestion…yes. CMBS: (1) Life company CMBS pool went to market this week with institutional quality collateral and underwriting reflecting life company credit culture. Expected the AAA’s to price lower than the recent pools which priced in the T+140-150 range but the AAA’s went out at T+150, indicating that the recent spread widening is not "correcting" anytime soon. (1) Y2K has investors holding larger cash reserves. An unknown quantity causing some investors to worry that there will be interruptions in payments in early 2000, they are building liquidity. (2) The 4th Quarter 1999 is being declared "a dead zone" with very little corporate or CMBS paper scheduled to come to market. The 3rd Quarter is oversupplied. (3) Quote from senior officer of a major originator: "The Street is creating their own nightmare. We’re asking corporate America to get everything done in the 3rd quarter. We have the specter of oversupply. Things are going to gap out. Spreads will widen a little bit here in the next 30 days. I have every indication that they’ll come back in." (4) Spreads: Originators are forced to widen spreads on new loans. Over the last three weeks spreads have widened across the board 10-20 bps. Max $ apartment loan spreads are now at 210-220. (5) Lenders are not panicking. Most are actively looking for new business. One originator told us this week that they are prepared to portfolio loans into next year, anticipating that spreads will have narrowed by then. Stay tuned……
BLESSED EVENT: Joan Elizabeth Mozer born…expanding the GSP family.
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July 29, 1999:
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5:54 AM:
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Deb wakes Gary…water breaks…contractions start.
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6:05 AM:
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GSP mobilizes for the big day.
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6:15 AM:
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Two conference rooms reserved at UCLA Medical Center, 20’ from the Mozer birthing room.
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6:30 AM:
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Two critical loan closing conferences notified of venue change.
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6:50 AM:
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Gary and Deb check-in at UCLA.
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7:00 AM:
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Limos begin picking up meeting participants.
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8:15 AM:
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Breakfast noshes delivered from Nate & Al’s.
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11:55 PM:
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Doctor announces delivery imminent.
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12:10 PM:
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Meetings suspended and participants join the Mozers in the birthing room.
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12:36 PM:
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Baby Joan Elizabeth delivered "picture perfect", 7 lbs. 2 oz., 19". Mother and daughter did great. No comments about Gary.
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1:00 PM:
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Meetings resume.
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1:35 PM:
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Deal #1 successfully closes.
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2:05 PM:
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Deal #2 successfully closes.
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Another typical day in the meteoric career of Gary Mozer. We love you, Gary.
HOT MONEY
Bank Introduces 10 yr. Floating Rate Program Ideal For Borrowers Gun Shy of Run Up in Fixed Rates:
(1) Par to lender (2) Rate: yr. 1 @ 7 ¾ %; yrs. 2-10 @ 2.25% over the 10 yr. CMT (Constant Maturity Treasury) adjusting quarterly (3) Floor @ 7 ¾% and Ceiling @ 10% (4) LTV 75% max (5) DCR @ 1.20 minimum (6) No legal, $2000 for processing and docs (7) No structural or ALTA (8) Office, retail and industrial (9) $350,000,000 for balance of year (10) 1% prepay yrs. 0-3, open thereafter (11) Up to $25MM although comfort zone $10MM + (12) California only.
Andrew Levant Joins GSP!
Andrew Levant brings to George Smith Partners 16 years experience in commercial real estate: (1) VMS Realty Partners, Chicago in hotel acquisitions and asset management (2) J.E. Robert Company as a marketing coordinator and asset manager (3) Santa Monica based Kennedy-Wilson International, sold and arranged financing for $300 million worth of high-end residential and commercial properties (4) Finova Realty Capital. Mr. Levant is married with two young children, attended Arizona State University and UNLV where he received a Bachelor of Arts.
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Save The Date!
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The 5th Annual GSP Real Estate Luncheon to Benefit the A-T Medical Research Foundation
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Date:
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November 3, 1999
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Place:
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Century Plaza Hotel
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Keynote Speaker:
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Anthony Downs, The Brookings Institute
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