Life Company Adapting to New Structures

TRANSACTION OF THE WEEK!!!

$3,982,000 (83% of Borrower's Cost) Non-Recourse Construction for Theater Anchored Retail in Central California Secondary Market: The Project: 13-screen theater (45,000 s.f.), plus 13,500 s.f. of in-line retail. No pre-leasing on the shop space. The project is a joint venture between our client, a developer specializing in urban infill redevelopment projects, and the redevelopment agency, who contributed equity to the project. GSP obtained a non-recourse construction loan with completion guarantee only, no repayment guarantee. Challenges to Financing: (1) Being one of the first newer projects in the redevelopment agency, and also being a specialty product type, rent and sales comps were difficult to obtain; (2) with a shakeout in the theater industry during the loan marketing process, identifying and qualifying a lender was difficult. Terms: (1) Rate: Prime + 0.75%; (2) Term: 18 months/interest only, then a mini perm at 15 year term/25 year amort. at Prime + 1.0%; (3) Loan-To-Cost: 60% (83% of total project cost before contribution from redevelopment agency); (4) Completion guaranty only; (5) Lender Fee: 1.0%. (Michael Schwartz, George Smith)

HOT MONEY !!!

Life Company Adapting to New Structures, Getting Aggressive With Floaters and Large Mezzanine: This lender is adapting to the changing capital structures by offering new lending programs. Their portfolio is presently "overweighted" on the East Coast, so they are pursuing Western US transactions. These programs are targeted at value added opportunity transactions, single properties or portfolios. Mezzanine Program Highlights: (1) Transaction Size: $15,000,000-$50,000,000 (portfolio submissions are encouraged); (2) Term: Typically 3 years, 4 years will be considered; (3) Pricing: LIBOR + 6.00-7.00%; (4) Fees: 1.0% origination, exit fees are deal specific depending on risk; (5) Secured by partnership interest. Floating Rate Program Highlights: (1) Transaction Size: $20,000,000 and up; (2) LTV: 70-85%; (3) Loan Terms: 3-5 years; (4) Amortizations: 25-30 years; (5) Pricing: 30, 60 or 90-day LIBOR + 2.50-375% (2.50% is for lower leverage); (6) Lender Fee: 1.0% (negotiable on larger transactions); (7) Prepayment: Negotiable w/ some lockout and step down leading to payoff at par.

Interest Rate/CMBS Update: Treasuries: What a difference 3 days can make!!! Monday and Tuesday, multiple surveys of economists were predicting another 0.50% increase by the Fed during the June 27-28 meeting. Then came the reports: (1) Wednesday: Chicago Purchase Managers Index and New Home Sales indicated slower demand in wholesale and home buying markets respectively; (2) Thursday: Construction Spending was down dramatically, the first decrease in many months and the National Association of Purchasing Managers echoed the Chicago results; (3) Friday: Unemployment spiked up to 4.1% with Hourly Earnings rising a negligible 0.1%. Non-government jobs fell for the first time in 4 years. Labor market tightness and wage inflation are very closely monitored by the Fed and Fed-watching bond traders. This week's data indicated the recent Fed tightening moves are having the desired cooling effect on the economy. As an added "bonus": Factory Orders dropped 4.3% -- the biggest decline in a decade. All this caused the 10-year T, which has been in the 6.45%-6.50% range for weeks, to flirt with 6.00% this morning, finally settling at 6.15% at today's close. The upward swing in yield this afternoon was attributable to profit taking and funds pouring into the equity markets. Bottom Line: The market consensus is now split 50/50 on the following scenarios for June's Fed meeting: A 0.25% increase or none at all. CMBS: The Treasury rally and the new Fed outlook has spurred a rally in the swap market. Swaps have been dictating CMBS spread movement lately. Swaps began the week in the +130 to 135 range and are now at +123 to 127. Borrowers who have opted for apps. with swap based pricing are benefiting as their all-in coupon rates decrease accordingly. Most originators surveyed have not dropped their spreads matrices yet, but plan to do so early next week. Stay tuned…. (David R. Pascale, Jr.)

The GSP family keeps growing!!!
CONGRATULATIONS TO GSP'S MIKE GOTTLIEB AND WIFE TRACY!!!

Peter Bryant Gottlieb was born Wed., May 31st in Orange County (although Mike is a huge Laker fan, the baby is not named after Kobe!). Highlights: (1) Time/Date: 5:53 a.m., Wed., May 31st; (2) Weight: 8 lbs., 7 oz.; (3) Tracy and Baby: Resting comfortably. Our heartfelt congratulations go to Tracy and Mike from all of us at GSP.