Top Off the Tank Mezzanine Program - FINfacts | George Smith Partners

KEY RATE INDICES

FANNIE MAE RATES *

Prime Rate	7.50%
11th District	5.426%
3 Mo. T’s (YTM)	3.75%
6 Mo. T’s (YTM)	3.83%

5 Yr. U.S. T’s	4.80%
10 Yr. US T’s	5.28%
30 Yr. US T’s	5.79%
12-MAT	5.711%

LIBOR - 1 mo.	4.52%
LIBOR - 3 mo.	4.41%
LIBOR - 6 mo.	4.32%
LIBOR - 1 yr.	4.38%

Tier 2+ (80% LTV)	7.20%
Tier 3+ (65% LTV)	7.02%
Tier 4+ (55% LTV)	6.82%
10 yr. term/30 yr. amort.


TRANSACTION OF THE WEEK
$5,700,000 for Bergamot Station Phase II; a 50,815 s.f. Creative Use/Artist Gallery Complex (Fixed Rate, Prepayable Without Penalty): This 21-tenant arts complex is the old "red line" terminal in Santa Monica. The "red-line" was Los Angeles' legendary light rail system which shut down in 1953. Bergamot Station hosts approximately 1,000,000 visitors per year, second only to the Getty Center. This financing encumbers Phase II of the 2-parceled complex. Phase II is owned fee simple by our borrower, whereas Phase I (33 tenants/135,000 s.f.) is ground leased from the City of Santa Monica on a month-to-month basis. Phase II tenants include the 10,000 s.f. Santa Monica Art Museum along with an eclectic mix of galleries and creative use space. Occupancy: 100% with a waiting list. (Borrower receives numerous unsolicited calls to lease space on a daily basis). Several studios are "live-work" spaces on commercial leases. Purpose of the loan was to refinance borrower out of construction/mini-perm (construction included a major rehab of two 1960's structures along with ground up construction of one new architecturally unique designed building). Issues/Solutions: (1) Parking: Fee simple parking only includes 9 spaces whereas 45 are required for zoning. Portfolio lender (a credit company) familiar with the Santa Monica market, became comfortable that the month-to-month parking available on Phase I would continue beyond the loan term; (2) Environmental: Portion of site was former location of 1920's landfill for the City of Beverly Hills, additional industrial activity in the area has contributed heavy metals and solvents to area ground water. Lender mitigated with environmental insurance. Terms: (1) Rate: 9.00%, Fixed; (2) Term/Amort: 5+5/30 (Rate is reset after 5 years at prevailing rate); (3) LTV: 75%; (4) DCR: 1.30; (5) Recourse; (6) Lender Fee: 1.0%; (7) Prepayment: Prepayable at any time without penalty. (David Stepanchak, George A. Smith)

HOT MONEY!
Top Off the Tank" Mezzanine Program Helps CMBS Borrowers Free Up "Trapped" Equity: This innovative lender has spent over a year developing a program to allow borrowers to access the appreciated value of their properties with seasoned conduit loans. Defeasance/Yield Maintenance provisions make prepayment a difficult and/or expensive process. This new program has been blessed by the rating agencies. Unique "balloon" feature: The mezz. financing is co-terminus with the existing senior debt for the term and the amortization. (Example: A 3 year old 10/30 loan will be eligible to receive a new mezz. piece with a 7 year term and 27 year amort.) The new financing is secured by agreements with the general/limited partners. Program Highlights: (1) Loan Amounts: $1,000,000 to $15,000,000; (2) Maximum LTV: 80% for apts., 75% for commercial (combined leverage based on today's value, appraisal required); (3) Minimum Combined DCR: Apts. - 1.10, Office/Industrial - 1.15, Retail - 1.20-1.25; Note: DCR may be lower if significant escrow reserves have been built up by the senior lender; (4) Loan Terms: 3-8 years; (5) Lender Fee: 2.0%, no exit fee, no participation; (6) Nationwide.

TRENDS… INTEREST RATES
The Fed's surprise rate cut on Wednesday spurred an immediate bond market rally. Then yesterday, T's fell as bond buyers considered the inflationary impact of cheaper money flowing into the economy. However, today, T's rallied once again as comments by two Fed governors indicated the central bank's chief concern is still keeping the economy from falling into recession. Conclusion: The roller coaster ride isn't over. Yield Curve: Today the yield curve is dis-inverted completely for the first time since January 2000, i.e. back to "normal". Swaps: Swaps came in dramatically this week (approx. 10 bps) as traders perceive less credit risk, top drawer corporate bonds also narrowed. CMBS: Confusion over new accounting rules stalled new issuance. A big pipeline of deals started to price this week (approx. $8 billion) as originators are now ready to go to market. AAA's and other investment grade classes narrowed slightly due to Swap dynamics and short supply. B piece activity is starting to pick up as the yields are more attractive this year in the wake of the dot.com meltdown, etc. However, demand for the middle classes (A, BBB and BB) is softening slightly. Why? The buyers for those pieces are mostly small to mid-size life companies who are beginning to be concerned about leverage and where we are in the cycle. These bonds are still selling, but at slightly higher spreads. Stay tuned….. (David R. Pascale, Jr.)

SPEAKER'S CORNER
May 3, 2001 - George Smith, Richard Ziman and Fred Sands will share their overviews at the monthly Real Estate Cabinet breakfast meeting for the Los Angeles Jewish Federation at the Four Seasons Hotel (Doheny and Burton Way) at 7:30 a.m.

* 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.

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