Marina Financing Program

TRANSACTION OF THE WEEK!!!

$10,000,000 Non-Recourse Second Mortgage Construction Loan 100% Loan-to-Cost/98% Loan-to-Value Construction Loan on East Coast Retail Center: GSP has arranged a $10,000,000 non-recourse second mortgage construction loan (for 100% loan-to-cost/98% loan-to-value) for a 90% pre-leased, 125,000 sq. ft. grocery anchored retail center on the East Coast. Structure: The approximate $21,000,000 project cost was completely financed by a senior construction loan of $11,000,000 and the GSP-arranged subordinated construction loan of $10,000,000 - the borrower was required to have NO CAPITAL in the transaction. There is a 100% of cost, completion-only (no leasing, LTV or DCR requirements) put option in place. GSP was able to secure the second mortgage construction loan to comprise 100% of the construction costs with only a completion guaranty and an environmental indemnity. The subordinated piece was funded prior to the senior loan funding. As such, the $10,000,000 mortgage coverts from a first lien to a second lien once the senior piece funds. Even with the put option in place as the exit strategy, the loan-to-value ratio was too high to meet Federal bank reserve requirements. Therefore, the financing had to be bifurcated into two tranches (with the subordinated mortgage from a separate entity) utilizing an intercreditor agreement with the option grantor. Property: A 125,000 sq. ft. grocery anchored retail complex with 90% pre-leasing. Approximately 75% of the pre-leased tenants are credit rated. Part of an existing retail complex with a theater, restaurants and other promotional tenants. Terms: (1) Loan Amount: $10,000,000; (2) Loan-to-Cost: 100%; (3) Loan-to-Value: 98%; (4) Interest Rate: LIBOR + 2.00%; (5) Amortization: Interest only; (6) Loan Term: 36 months; (7) Recourse: Non-recourse except standard carve-outs; (8) Lender Fee: 0.50%. (Gary E. Mozer, Lee T. Norman)

Wall Street Journal Economist Survey Consensus - Rates to Remain Steady for Remainder of 2000: The mid-year 2000 survey of 55 economists was published on Monday, July 3rd. Although the average rate prediction for the 30-year Treasury close on December 31, 2000 is 6.01% (up slightly from today's of 5.87%), some of the prognosticators see slightly more volatility. 33 participants are in the 5.70%-6.25% range, with 8 in the 5.00%-5.60% range, and a "bearish" group of 12 predicting in the 6.3%-7.1% range. Most economists see a "soft landing" engineered by the Fed, but are divided on what that means: Slower growth may lead to lower corporate profits, some predict slow growth with or without inflation. This Week: 10-year T closed at 6.00% exactly, as the market cheered this morning's labor report indicating slower job growth than in previous months. The Fed Fund futures implied yield for September dropped to 6.595%, indicating no expectation of another rate hike at the August 22nd Fed meeting (6 weeks ago the implied yield was at 7.01%, traders expected 0.5% worth of increases). Swaps narrowed approx. 5 bps this week, also the average investment grade corporate bond spread narrowed to +194 over the 10 year, down from a decade long high of +202 last week. No CMBS issues priced this week, trading in the secondary market indicated bond spreads remain at stable levels with no immediate widening or narrowing on the horizon. Stay tuned…. (David R. Pascale, Jr.)

HOT MONEY!!!

Marina Financing Program: Naturally, floating rate loans are the norm for this property type (we're not joking!)…. A nationwide lender has a division dedicated to this type of property, which takes specific expertise to underwrite correctly. The majority of marina properties are on government leaseholds, for both the land and "submerged land" portions of the security. Lender will size deals to anywhere between a 1.30 and 1.50 DCR, depending on the strength of the income sources. "Stronger" income comes from: Boat storage, wet slips, dry dock. "Weaker" income sources: Repairs, sales, service, boat rentals, shops, etc. Program Highlights: (1) Loan Sizes: $2,000,000 and up; (2) Pricing: 30-day LIBOR + 3.00%-4.00%; (3) Term/Amort: 5/20; (4) Prepayment: usually 2 year lock, 1.0% fee after that (which may be waived); (5) Maximum LTV: 75%, however most transactions are DCR constrained; (6) Lender Fee: 1.0%.

REMINDER TO ALL 2000 GSP/A-T EXECUTIVE LUNCHEON SERIES PARTICIPANTS

Stephen Slifer, Chief Economist for Lehman Brothers, will be briefing attendees at Luncheon III of the Series on Wed., July 12th. Look for a report in next week's Fin-Fax.