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| KEY RATE INDICES |
FANNIE MAE RATES * |
| Prime Rate |
4.75% |
| 11th District |
3.074% |
| 3 Mo. T’s (YTM) |
1.76%
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| 6 Mo. T’s (YTM) |
1.86% |
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| 5 Yr. U.S. T’s |
4.14% |
| 10 Yr. US T’s |
4.83% |
| 30 Yr. US T’s |
5.34% |
| 12-MAT |
3.260% |
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| LIBOR - 1 mo. |
1.85% |
| LIBOR - 3 mo. |
1.90% |
| LIBOR - 6 mo. |
2.04% |
| LIBOR - 1 yr. |
2.44% |
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| Tier 2+ (80% LTV) |
6.66% |
| Tier 3+ (65% LTV) |
6.48% |
| Tier 4+ (55% LTV) |
6.28% |
| 10 yr. term/30 yr. amort. |
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TRANSACTIONS OF THE WEEK!
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$17,100,000 ($7,000,000 Higher Than Applied For) for Two Separate Multi-Tenant Office Buildings Loans; 7.625% Fixed for Five Years With No Prepayment Penalty: Both of these Southern California properties are Class "B" buildings that were built in the early 1970s and purchased in 1997 with no tenants. Properties are located in a downtown redevelopment area of a secondary market that has since turned around. However, at the time of purchase, the market had extremely high vacancy. The purpose of the financing: Take out high interest rate acquisition debt and mezzanine financing. Because the properties were purchased at a very low price, the new financing allowed the borrower to recoup all equity, tenant improvements, leasing commissions and capital expenditures in addition to pulling a substantial amount of cash out. Challenges to financing: Obtaining high leverage debt for class "B" office space in a secondary location. Lender was able to get comfortable with the transaction due to: majority of space leased to government credit tenants with no outs in the leases, market on upswing, borrower's ability to successfully operate a large portfolio of similar buildings in the market achieving economies of scale, borrower's strong net worth and liquidity. Loan Terms: (1) Loan Amounts: Bldg 1-$10,430,000 (144,200 s.f., 90% occ.); Bldg 2-$6,700,000 (113,000 s.f., 50% occ.--waiting for federal agency to lease remainder); (2) Rate: 7.63%, fixed; (3) Term/Amort: 5/25; (4) LTV: 75%; (5) Cap Rate: 8.9%; (6) DCR: 1.25; (7) Recourse; (8) Lender Fee: 1.25%; (9) Special Features: Prepayable at any time; No reserves; Lender used original estoppels from the leases (no new estoppels required); Lender will consider a second funding (potentially $5,000,000) when building 2 is stabilized; Transactions funded two days after approval. (Michael Gottlieb)
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| $5,670,000 Fixed Rate Single Tenant Financing for a 44,276 s.f. Best Buy in Manchester, Connecticut: Our borrower purchased this property via a short term seller carry-back loan. GSP arranged permanent financing within 40 days. Property is well located within a 110,000 s.f. center and across the street from a regional mall. History: Building constructed in 1995 for Media Play. Best Buy acquired MP. BB rehabbed the building and took occupancy in 1999. Challenges to Financing: (1) Tenant would not provide sales information, (2) 20,000 s.f. Office Depot in center is dark, but paying rent. Therefore, lender required a 25 year amortization. GSP structured a 30 year amortization with a reserve commencing on month 30 to correspond with a rent bump so that the borrower's cash flow remains unchanged. Reserve would accrue to an amount to pay down principal mirroring a 25 year amortization. If a non-seasonal tenant takes occupancy, no reserve is collected. Terms: (1) Rate: 10 year T + 2.35%; (2) Term/Amort: 10/30; (3) LTC: 75%; (4) DCR: 1.25; (5) Non-recourse; (6) Par. (Michael Schwartz) |
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| $4,200,000 (84% of Cost) for Art Deco (1930's Vintage) Creative Office Building in Hollywood, California: This financing allowed our borrower to pay off a conduit loan they assumed at purchase (2 months earlier). GSP arranged financing with a portfolio lender who funded 30 days after application. Property Specs: 2 stories; 44,000 s.f.; high ceilings; exposed concrete floors/ceilings; 100% occupied; 7 tenants; storied entertainment history. Terms: (1) Rate: 7.375%, fixed; (2) Term/Amort: 5/25; (3) LTC/LTV: 84%/75%; (4) DCR: 1.25; (5) Lender Fee: 1.25%; (6) Recourse; (7) Prepayment: Open at par. (Andrew Levant, Shlomi Ronen) |
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| Hyperion Capital Management President Clifford Lai Presented "CMBS-An Investor's Point of View" at Luncheon I of the 2002 GSP Executive Luncheon Series to Benefit the A-T MRF: Hyperion manages over $7 billion in fixed income assets for public and private pension plans, insurance companies, foundations, and mutual funds. He also heads Lend Lease Hyperion Capital Advisors, a joint venture with Lend Lease, which focuses exclusively on investments in commercial mortgage-backed securities on behalf of clients. Highlights: (1) Total CMBS market (all existing bonds)=$350 billion today; (2) AAA bonds make up 76% of that; (3) Vintage matters: Market began to take off in early 90's. Existing bonds issued from 1990-1996 are good investments-products of conservatively underwritten loans and well seasoned (risk mitigates as loan balances are paid down and equity rises). Years with highest delinquency rates: 1997 (Height of "Swinging conduit" era with liberal underwriting) and 2000 (values were peaking). (4) Biggest Buyers: Money managers (39.4%), Insurance companies (27.5%), Banks (23.8%); (5) B pieces: Total volume of existing bonds=$21 billion. Not enough for the large bond funds to allocate portions of their portfolios (unlike corporates, municipals, treasuries, etc.) Therefore, buyers are few (a "cartel" of 8). Barriers to entry exist due to level of diligence required; (6) Yields have not recovered from 1998 spike which drove out several players; (7) CMBS continues to perform well compared to corporates; (8) Current issues: B piece kick outs due to credit concerns, this is the first economic downturn since 1990, market will be tested as delinquencies rise, rating agencies are requiring more subordination; (9) 9/11: Trophy assets are receiving greater scrutiny, terrorism insurance is being required, investors must consider "raw land" value for major single assets due to terrorism risk. (10) Performance: Upgrades continue to well outnumber downgrades. (David R. Pascale, Jr.) |
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Luncheon I of the 2002 GSP Executive Luncheon Series to Benefit the A-T MRF
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| Hyperion Capital Management President Clifford Lai Presented "CMBS-An Investor's Point of View" at Luncheon I of the 2002 GSP Executive Luncheon Series to Benefit the A-T MRF: Hyperion manages over $7 billion in fixed income assets for public and private pension plans, insurance companies, foundations, and mutual funds. He also heads Lend Lease Hyperion Capital Advisors, a joint venture with Lend Lease, which focuses exclusively on investments in commercial mortgage-backed securities on behalf of clients. Highlights: (1) Total CMBS market (all existing bonds)=$350 billion today; (2) AAA bonds make up 76% of that; (3) Vintage matters: Market began to take off in early 90's. Existing bonds issued from 1990-1996 are good investments-products of conservatively underwritten loans and well seasoned (risk mitigates as loan balances are paid down and equity rises). Years with highest delinquency rates: 1997 (Height of "Swinging conduit" era with liberal underwriting) and 2000 (values were peaking). (4) Biggest Buyers: Money managers (39.4%), Insurance companies (27.5%), Banks (23.8%); (5) B pieces: Total volume of existing bonds=$21 billion. Not enough for the large bond funds to allocate portions of their portfolios (unlike corporates, municipals, treasuries, etc.) Therefore, buyers are few (a "cartel" of 8). Barriers to entry exist due to level of diligence required; (6) Yields have not recovered from 1998 spike which drove out several players; (7) CMBS continues to perform well compared to corporates; (8) Current issues: B piece kick outs due to credit concerns, this is the first economic downturn since 1990, market will be tested as delinquencies rise, rating agencies are requiring more subordination; (9) 9/11: Trophy assets are receiving greater scrutiny, terrorism insurance is being required, investors must consider "raw land" value for major single assets due to terrorism risk. (10) Performance: Upgrades continue to well outnumber downgrades. (David R. Pascale, Jr.) |
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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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