Notes from Monday's Real Estate

TRANSACTION OF THE WEEK!!!

HOT MONEY!! 

California Portfolio Lender Offers “No-Frills” Apartment or C&I Mortgages up to $10,000,000:No appraisal, environmental, engineering reports… no impounds (except for RE taxes), no legal, rate locked at app, no SPE entity required (all types of ownership are accepted) and 360/360 pricing.  This is what Sid Wallis refers to as “old fashioned lending” (Sid should know, see below). Two distinct programs are available: (1) Fixed/Floater: 15 year maturity, begins as a fixed rate (for 3, 5, 7 or 10 years) and then converts to a 12-MAT or LIBOR based floater for the remainder of the maturity term.  Amortizations are 25 years for commercial, 30 years for multifamily.  Flexible Prepayment: Locked for 2 years then 6 months interest, up to 20% of loan balance is prepayable at par annually after year 2.  Rates start at 8.10% for multifamily and 8.35% for commercial; (2) Variable/Convertible Loan: 10 year variable rate loan, which converts to fixed at any time within the first 3 years for no additional fee; total term can be up to 13 years if borrower converts at end of year 3 to a 10-year fixed at T + spread. Start Rates: 12MAT + 2.35% or LIBOR + 2.10% for apartments (add approx. 25 bps for commercial). Prepayment: 1.0% during year 1, par thereafter. For both options: Non-recourse for multifamily. DCR: 1.15 for multifamily, 1.25 for commercial.

Notes from Monday’s Real Estate Conference Group’s Technology Conference: A capacity crowd filled the Century Plaza Hotel’s Main Ballroom to learn about the impact of tech on real estate.  Some Highlights/Comments: (1) “Why use technology if it doesn’t increase yield?” Note: yieldstar.com will analyze an asset to maximize profit per foot; (2)Real estate is further behind than most industries in “B2B” efficiencies; (3)At present, best returns on commercial props will be in “knowledge neighborhoods” often located in secondary markets proximate to the fiber optic “backbone”, look for wireless technology to change that; (4)By late 2002 or early 2003, most net traffic will be via wireless connections on devices other than PC’s; (5) Tech industries grow at 4x the rate of non-tech; (6)Housing prices are strongly correlated to tech growth; (7)Intro of digital conference rooms will shift business reliance away from paper; (8)Coming Soon: Terabytes of  bandwidth; (9)Large flat screens will change the face (literally) of office building common areas; (10)Net Trend: Imminent consolidation and acquisition of real estate portals; (11)Trend: National real estate brokerage licensing may be coming soon; (12)B2B will yield 15-20% gains in efficiency across the board in next 2 Yrs.; (13)Data integrity & security on the net will improve; (14)Many companies are moving to voice communication over internet to cut long distance costs; (15) Landlords need to accommodate more “24/7” businesses which will increase maintenance costs and physical wear; (16)Retail: Tech will not “kill” retail, shopping experience is about being social; (17)Customers like to buy on line, return items in person favoring businesses such as Toys R Us; (18) Hot “Clicks & Morter” Tenants: Old Navy and Gap.  Blockbuster moving to smaller stores due to DVD lower shelf space requirements; (19)Transaction cycle time will be reduced as all processes move on line; (20) Look for the PDA and the cell-phone to converge in 2 years.  (Gary M. Tenzer, David R. Pascale, Jr.)

GSP’s Chairman Emeritus is celebrating his debut as an octogenarian with his entire family on a cruise ship.  All of us at GSP extend our warmest birthday wishes and hopes that Sid will underwrite many more deals using his slide-rule and the infamous “back of the envelope”.  Sid Wallis can be reached at swallis@gspartners.com or at ext. 208.