CMBS lender is pushing 5-year money

$8,000,000 Bridge Loan for Acquisition/Reposition for 58,610 s.f. "REO" Specialty Retail Center in Orange County: This 1988-built, two-story, retail center is anchored by a 5,000 s.f. upscale chain restaurant and 15,000 s.f. college prep center. Parking is in a subterranean garage under the entire property. The property went into bankruptcy in 1995 and five years of litigation followed, including implications of construction defects, lax management and less than a 50% occupancy resulting in the marketplace having a negative perception of the property. However, the property is extremely well located in a 100% occupied retail submarket with excellent demographics surrounded by offices and new apartments. Our borrower purchased the property from the lender and planned a renovation including new lighting, restoration of the landscaping, the addition of a fountain, and the creation of a distinctive architectural look which energized the leasing process. Several local lenders passed on the transaction because of the property's history. However, GSP located an out-of-state lender who based their decision on the economics. GSP arranged 80% of total project cost non-recourse financing. The financing included funding for renovations, tenant improvements, interest reserve, etc. Terms: (1) Rate: 90 day LIBOR + 3.15%; (2) Term/Amort: 3 years/interest only plus one 2-year extension option; (3) DCR: 0.90 (lender funded interest reserve); (4) Non-recourse; (5) Lender Fees: 1.0% origination, 1.0% exit. (Steve Bram, David R. Pascale, Jr.)

$1,800,000 Refinance of 30,000 s.f. Office Building in Anaheim, CA: GSP's Orange County office has arranged variable rate financing on this property built in the mid-80's as an "office condo" project. The owner purchased the property as a value-added play in the mid-90's. It is over parked, leased to the County and several other tenants. Rents are below market and there is some short-term rollover. The biggest challenge was the 80% occupancy, but was mitigated by cash flow slightly exceeding the 1.30 DCR constraint. Terms: (1) Pricing: 12-MAT + 2.95%; (2) Term/Amort: 10/25; (3) LTV: 70%; (4) DCR: 1.30; (5) Non-Recourse; (6) Prepayment Penalty: 1% in years 1-3, then par in years 4-10, (7) Lender Fee: 1%. (Mike Gottlieb)

CMBS lender is pushing 5-year money to take advantage of the dis-inverted yield curve. Ideal for borrowers seeking flexibility via shorter maturities and lower rate, especially when concerned with lockouts and 10 years of defeasance. Yield Curve: As of today there is 50 b.p. difference with the 5-year @ 4.8%; 10-year @ 5.3%. Rate Examples: (1) Multifamily @ + 190 = 6.70%; (2) Anchored Retail @ 230 = 7.10%. Other Maturities: Can do 5, 6, 7, 8, 9, 10. Lock-Out: 3 years, then defeasance.