Heard on the Street - FINfacts | George Smith Partners

KEY RATE INDICES

FANNIE MAE RATES *

Prime Rate	7.50%
11th District	5.198%
3 Mo. T’s (YTM)	3.72%
6 Mo. T’s (YTM)	3.77%

5 Yr. U.S. T’s	4.74%
10 Yr. US T’s	5.19%
30 Yr. US T’s	5.65%
12-MAT	5.711%

LIBOR - 1 mo.	4.38%
LIBOR - 3 mo.	4.29%
LIBOR - 6 mo.	4.25%
LIBOR - 1 yr.	4.40%

Tier 2+ (80% LTV)	7.02%
Tier 3+ (65% LTV)	6.84%
Tier 4+ (55% LTV)	6.64%
10 yr. term/30 yr. amort.


TRANSACTION OF THE WEEK
$14,250,000 Construction Loan for 150,000 Sq. Ft. Speculative Office Building in Downtown Sacramento: GSP has arranged construction financing for this 3-story, 150,000 s.f. class "A" office building. The loan amount represents 65% of cost and 55% of appraised stabilized value. The developer has a strong track record with this product type in the market area. Overall market conditions dictate that the building must come out of the ground before substantive lease negotiations can begin. The vacancy rate in this downtown metropolitan market is approximately 5%, with the immediate submarket in an industrial redevelopment area specifically designed for this product type. Upon signing of lease(s) to reach a 95% leasing level, the loan amount will increase to $16,000,000 and the rate will decrease to P + ½%, and upon occupancy P + ¼%. Terms: (1) Pricing: Prime + 1%; (2) Term/Amort.: 2 years plus two 6-month options, interest only; (3) Recourse; (4) Lender Fee: ¾ %. (Mike Gottlieb)

$4,800,000 Permanent Loan for Newport Beach Office Building with Executive Suites: This 1978 two-story building, 35,000, s.f., was purchased by the borrower in late 1999. Below market leases expired and the occupancy dropped to 71%, which allowed the borrower to move his offices (11% of the space) to the building and to roll new leases to market. Occupancy was increased to 96% in late 2000. The owner also acquired the Executive Suites operation in the building, which accounted for 31% of the space. The Executive Suites had been in the building since it opened and has always been over 95% leased with a waiting list. The new owner also had planned to perform minor repair and renovations to the building. The lender reserved funds for this work. Cash out was also permitted. Terms: (1) Rate: 7.50% fixed; (2) Term/Amort: 10/30; (3) LTV: 76%; (4) DCR: 1.25; (5) Lender Fee: Par. (Gene Brunkhardt)
$1,177,000 (100% Cash Out) for 11,300 Sq. Ft. Unanchored Strip Retail Center in Northridge, CA: This 1950's vintage center contains 7 tenants including a restaurant. Occupancy: 100%. Our borrower bought and rehabbed the center in 1998. GSP arranged CMBS financing with an originator who was willing to "throw one last little one into the pool", even with non-conforming characteristics (size, quality). Problem/Solution: One of the managing members of the LLC had bad credit and also a home foreclosure on his record. GSP and the lender structured the transaction with partial recourse and a springing lockbox. Terms: (1) Rate: 8.00%; (2) Term/Amort: 10/25; (3) LTV: 75%; (4) DCR: 1.30; (5) Lender Fee: Par (Michael Schwartz and Behzad Omid).

Heard on the Street - Recent Trends Affecting CMBS Spreads Shared with GSP by Senior Executive of Major Wall Street Originator: Trends affecting pricing for CMBS loans include what is happening with both the (1) Investment grade bonds rated AAA down to BBB+ and (2) "B" piece which is a blend of low and unrated tranches. The B Piece Buyers Still Yield Enormous Influence: There have only been a handful of B Piece buyers and they wield enormous power while only representing app. 5% of a typical pool. (1) They have the ability to throw out loans arbitrarily. (2) We are being told that there are new B piece buyers entering the market. (3) One of the dynamics is the dot.com melt down has dampened sky-high return expectations in the tech sector. B Pieces, with their 20-30% returns, are looking like a better investment than they were in 2000. More money funds are starting to look at investing in B pieces because of the excellent performance of the CMBS bonds and the continued perceived stability in the real estate markets relative to other investments. Softening In The Middle Tier of the Investment Grade Bonds: Conversely, the market is softening slightly in the middle tiers, i.e. A, BBB+, BBB. The buyers in these tiers are not the big institutions up top (which include pension funds and Freddie Mac for pools containing 30% multifamily). Much of the middle tranche bonds are bought by mid-size life companies who are concerned with leverage. This is because they are in second and third loss position on pools "where every loan is 80% LTV". The Result: Spreads are widening in the middle, contracting at the top and the bottom is staying steady and may start narrowing. Overall, spreads have come in about 5 bps with a continued range of pricing depending upon the originator, pool mix and need for specific product to create balance. (George A. Smith, David R. Pascale, Jr.)

* GSP is an L.A. correspondent for ARCS Commercial Mortgage, the nation's largest FNMA/DUS originator.
Note: Lender pricing and loan points are subject to change and exclude GSP loan placement fees.

Subscribe to Newsletter

← Back to Archive