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| KEY RATE INDICES |
FANNIE MAE RATES * |
| Prime Rate |
4.75% |
| 11th District |
2.823% |
| 3 Mo. T’s (YTM) |
1.84%
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| 6 Mo. T’s (YTM) |
2.07% |
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| 5 Yr. U.S. T’s |
4.72% |
| 10 Yr. US T’s |
5.35% |
| 30 Yr. US T’s |
5.77% |
| 12-MAT |
3.056% |
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| LIBOR - 1 mo. |
1.90% |
| LIBOR - 3 mo. |
1.99% |
| LIBOR - 6 mo. |
2.22% |
| LIBOR - 1 yr. |
2.81% |
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| Tier 2+ (80% LTV) |
7.16% |
| Tier 3+ (65% LTV) |
6.98% |
| Tier 4+ (55% LTV) |
6.78% |
| 10 yr. term/30 yr. amort. |
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TRANSACTIONS OF THE WEEK!
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$28,250,000 Refinance for Cross-Collateralized Portfolio of Highly Improved Bio-Tech Buildings: GSP has arranged permanent financing for 3 facilities located in a premier "life science community" on the East Coast. The area is an extremely desirable location for biotech due to excellent infrastructure, highly educated populace and proximity to major research facilities. The properties are located on the same street. The institutional borrower wanted to pay down a credit line and lock in fixed rate, non-recourse financing. Challenges: All tenants are non-credit, rents are reflective of the specialized build-out, GSP was able to get lender comfortable with underwriting rents based on other tenants in the business park. Property Specs: Bldg 1: 93,000 s.f., 2 story, single tenant (public company), corporate headquarters, built in 2000. Bldg 2: 60,000 s.f., 2 story, single tenant (subsidiary of public company), built in 1989. Bldg 3: 44,000 s.f., 2 story, 6 tenants, 100% occupied, built in 1989. Terms: (1) Rate: 10 year T + 2.42%; (2) Term/Amort: 10/30; (3) LTV: 75%; (4) DCR: 1.35; (5) Non-recourse; (6) Lender Fee: par. (Gary E. Mozer, Lee Norman))
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| $20,000,000 Walgreen Acquisition Line (Individual Loans, 7 year Term, 3 Mo. LIBOR + 2%, 2 Years Interest Only): Private Banking Group of Regional Bank customized an acquisition facility for investor acquiring Walgreens as an intermediate term investment strategy. The first two loans have been approved, the 1st funded 3/14/2002 and the 2nd will fund next week. All properties are in major urban areas in the Western U.S. Leveraged Investment Returns: With an 8% typical cap rate, the investor is receiving cash-on-cash returns in the mid-teens (excluding the equity build up from loan amortization). Loan Terms: (1) Loan Amount: Loan 1 @ $2,812,000 (13,905 s.f., $205/s.f.); Loan 2 @ $3,640,000 (15,120 s.f., $240/s.f.); (2) Rate: 3 Mo. LIBOR + 2%; (3) Floor: 5%; (4) Term: 7 years (5) Payment: 2 yrs Interest Only, 30 yr amort for remaining term; (6) LTV (not LTCost): 75%; (7) DCR: 1.20 based on stress test of 8%/30/8.81% constant; (8) Lender Fee: ½ pt; (9) Recourse; yes, the borrower accepted this provision because of Walgreen's AAA credit; (10) Prepayment: yr 1-2%, yr 2- 1%, open thereafter. (George Smith, Joel Simaie) |
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| $16,000,000 Refinance for Multi Tenant Office Building, 7.625% Fixed for Five Years With No Prepayment Penalty: This 160,000 sf Class "A-" building was built in the mid 1980s and purchased in 2000 completely vacant. It's located in downtown redevelopment area that has turned around, but at the time of purchase, the market had an extremely high vacancy rate. Present occupancy: 100%. The new financing took out high interest rate acquisition debt and mezzanine financing. Because the properties were purchased at a very low price, borrower was able to recoup all of the TI, leasing commissions and capital expenditures in addition to pulling a substantial amount of cash out. Challenges included obtaining high leverage on an office building in a secondary location with very little operating history. Lender was able to get comfortable due to: (1) many government credit tenants, (2) borrower's ability to successfully operate a much larger portfolio of similar buildings in the area, (3) strong net worth and liquidity of borrower. Lender allowed the borrower 30 days after closing to deliver all tenant estoppels to accommodate borrower's timetable in paying off the existing lenders. Although the building is 100% occupied, lender used an underwriting vacancy of 8.5% in the DCR calculation, which constrained proceeds. Terms: (1) Rate: 7.625%; (2) Term/Amort: 5/25; (3) LTV: 70%; (4) DCR: 1.30; (5) Recourse; (6) No prepayment penalty; (7) Lender Fee: 1.25%; (8) No Reserves. (Michael Gottlieb) |
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| $3,750,000 Acquisition Financing for 400,000 s.f. Distressed Indoor Mall in Midwestern Secondary Market: Our borrower purchased 400,000 s.f. of a 530,000 s.f. mall with 3 department store anchors. A separate owns one of the anchor spaces. The inline space is 42% occupied. Purchase price is approximately $12/ft. Due to his low basis, the borrower will be able to lower rents to attract new tenants. All anchors have a kick out clause if in line space goes below 60% occupancy. However, none have exercised this option. Transaction closed in 45 days from app to funding. Terms: (1) Rate: Prime + 2.25% (7.25% floor); (2) Term/Amort: 15/15; (3) LTV: 75%; (4) Recourse: yes; (5) Lender Fee: par. (J. Jay Brooks, Jan Hood) |
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| $4,300,000 Non-Recourse, Participating Land Loan for Acquisition and Pre-Development of Planned 40 Unit Artist-in-Residence Lofts in Venice Beach: This development will be "Phase II" of a 90-Unit Condominium complex. This financing was used to purchase an approximately 30,000 s.f. irregular shaped parcel contiguous to Phase I, which is currently under construction. Initial funding was $3,000,000 with the balance to be disbursed for entitlements and other pre-development soft costs. The loan is secured by a first trust deed on the property. However, upon securing a construction loan, this loan will convert to preferred equity. Terms: (1) Rate: 12%; (2) Term/Amort: 36 months/Interest only (18 months to obtain entitlements); (3) LTC: 95%; (4) Non-recourse; (5) Lender Fee: 2%; (6) Equity terms: 30% IRR commencing upon new senior loan funding. (Andrew Levant) |
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HOT MONEY
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| Lender For NNN Kohl's With 3 Yr Hangout Beyond 20 Year Lease Term: GSP presented a Kohl's (S&P A-) lease to approximately 35 lenders (insurance companies, pension funds and CMBS) doing investment grade single tenant lease financing. Our client, coming out of a 1031 exchange, required a minimum 23 year amortization to (1) achieve certain cash-on-cash returns, (2) eliminate refinance issues after 10 years, and (3) avoid interest rate risk impacting his cash-on-cash return. The Kohl's lease term was 20 years. Only one lender was willing to provide the hangout while pricing aggressively relative to the tenant's credit. Terms: 75% Loan to Purchase, 23/20, 230 basis points over the interpolated 15-year Treasury, amortization based on the residual land value after 20 years (less than $2MM). This lender will consider other investment grade tenants. "A Real Estate Loan -vs- Credit Tenant Lease (CTL) Loan": The issue we ran into was that once a loan is classified as a "real estate transaction" and not a Credit Tenant Lease (CTL) transaction (which self liquidates over the lease term), the lenders' internal reserve requirements increase five fold for the 20-year term of the loan. The additional reserves make the execution less favorable for the portfolio lenders, the reason why hangouts have virtually disappeared for long-term investment grade leases. |
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| * 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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