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| Volume VIII, No. 47 |
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December 8, 2000 |
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| KEY RATE INDICES |
FANNIE MAE RATES * |
| Prime Rate |
9.50% |
| 11th District |
5.589% |
| 3 Mo. T’s (YTM) |
6.05%
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| 6 Mo. T’s (YTM) |
6.01% |
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| 5 Yr. U.S. T’s |
5.26% |
| 10 Yr. US T’s |
5.30% |
| 30 Yr. US T’s |
5.51% |
| 12-MAT |
6.128% |
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| LIBOR - 1 mo. |
6.72% |
| LIBOR - 3 mo. |
6.57% |
| LIBOR - 6 mo. |
6.45% |
| LIBOR - 1 yr. |
6.31% |
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| Tier 2+ (80% LTV) |
7.31% |
| Tier 3+ (65% LTV) |
7.16% |
| Tier 4+ (55% LTV) |
6.96% |
| 10 yr. term/30 yr. amort. |
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TRANSACTION OF THE WEEK!!!
$18,500,000 (7.90%) Acquisition Financing for 160,000 s.f. SoCal Class "A" Suburban Office Building George Smith Partners has arranged a 77% of cost acquisition loan for this well located "office complex". The Ventura County location boasts excellent demographics. Property Specs: Built in 1983, rehabbed in 1998, 13 acre lot size. Configuration: 5 story central "tower" w/2-2 story wings. Occupancy: At application 91%, borrower leased up to 100% during process (45 days app to funding). Challenges to Financing: (1) The 2 major tenants are internet/tech companies which have been giving Wall Street jitters. Lender created sinking fund providing for leasing/TI's in the event a tenant vacated. (2) Previous owner operated building in excess of $10/ft expenses. GSP helped provide lender with data supporting market rate expenses. Terms: (1) Rate: 7.90%; (2) Term/Amort: 10/30; (3) LTC: 77%; (4) DCR: 1.30; (5) Non-recourse; (6) Lender Fee: Par. (Lee Norman, Peter Smyslowski) |
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| $18,000,000 (75% of Purchase Price) Floating Rate Acquisition Financing for 325,000 s.f. Grocery Anchored Inland Empire Shopping Center With Tenants-In-Common Ownership This sprawling center consists of 3 contiguous parcels each with its own buildings and parking. The center was built in 2 phases in the late 1980's. The 60 tenants are a broad cross section of local businesses and national chains, including several restaurants. Occupancy: 90%. Challenges to Financing: Dark drug store, dark bank (both still paying rent), some vacancy, 25 separate tenant in common investors. Lender became comfortable with borrower's expertise at managing retail centers in secondary markets. Terms: (1) Loan to Cost: 75%; (2) Pricing: 30 day LIBOR + 2.35%, borrower had to purchase LIBOR cap; (3) Term/Amort: 4 years/interest only (cash sweep during final 18 months of loan); (4) DCR: 1.28%; (5) Prepayment: 15 month lock out; (6) Non-recourse; (7) Lender Fee: 1 1/8 pts. (Steve Bram, David Pascale) |
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100% of Project Cost Financing Nationwide investor will provide financing for retail and office "ground-up" construction projects on a non-recourse basis. They will consider major repositioning on a case-by-case basis. Program Highlights: (1) Project size: $8,000,000 to $25,000,000; (2) Financing Structure: (a) Lender funds 100% of construction costs, a 4.0% developer fee (split between lender and developer 50/50), 1.0% lender fee and an interest reserve for the construction period. Profits are split as follows: Lender gets first 5%, Developer gets next 5%, then split 50/50. |
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Interest Rate/CMBS Update: Treasuries rallied 22 bps this week as the 10 year T closed at 5.30% Factors: (1) Flight to quality due to uncertainty about corporate profits, presidential election, and corporate bond spreads continuing to widen. Latest: Commercial paper spreads widened dramatically this week as investors continue to be skeptical of all but "top-tier" investment grade companies. Also, today's Supreme Court decision favoring Gore caused a late bond market rally as investors see him more likely to pay down government debt. (2) Economic reports indicate economic slowdown. Speculation centers on whether it's the "soft-landing" or recession. (3) Comments by Greenspan this week convinced investors the Fed will shift to a "neutral" bias at their December 19 meeting and cut rates in early 2001. Note: The implied yield on the March 2001 Fed Futures rate dropped to 6.18% (today's Fed rate is 6.50%), indicating that the market has "priced-in" a quarter point Fed rate decrease. CMBS gains in investor appeal as it is considered a more diversified instrument than corporate bonds or commercial paper. The 10 year mid-market SWAP has dropped dramatically to +100, nearing its low for the year. (David R. Pascale, Jr.)
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SPEAKER'S CORNER
George Smith will be moderating the Finance Panel at Real Estate Conference Group's "Real Estate 2001" Conference where over 40 Real Estate Leaders will share their outlooks on the new year. Date: January 19, 2001; Location: Century Plaza Hotel (Los Angeles). For more information, call (310) 285-5327 or go to www.realestateoutlook.com.
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| * GSP is an L.A. correspondent for ARCS Commercial Mortgage, the nation's largest FNMA/DUS originator. |
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