Extremely Flexible Portfolio Lender

$9,250,000 5 Year Fixed Rate Repositioning Loan (Over 100% of "Below Market" Purchase Option) Closed in 20 Days for 60% Occupied 66,000 s.f. Medical Office Building: We normally don't brag about loans, but we had to share this note from the borrower for a transaction where our financing created over $3,000,000 in value:

"In my twenty-seven years of business I have never worked with a more professional organization than George Smith Partners. This transaction would not have happened if they did not structure this entire loan including designing the holdback structure and other customized terms that I needed for the lender. GSP's fee for this transaction was money well spent."

"The Perils of Pauline": GSP arranged acquisition and re-positioning financing for a 3-story, San Fernando Valley medical office building built in the early 1990's. (1) The borrower purchased the building as an REO with significant earthquake damage. (2) Participating acquisition financing was provided by a Wall Street Opportunity Fund. (3) When the Fund's note came due, the building was 60% occupied because of issues associated with the contiguous hospital. The NOI was insufficient to secure financing to pay off the loan including the participation provision. (4) Negotiations had been completed with a credit tenant for the majority of the vacant space subject to final confirmation by the tenant's directors. (5) The Opportunity Fund filed a notice of default and had a receiver appointed. (6) The borrower gave the lender a "deed-in-lieu" with a 30-day option to repurchase the building for $7,000,000. (7) After 30 days the purchase option had a substantial price increase. (Note: the option was going to expire before the scheduled approval date for the new lease) (8) The projected stabilized valued was over $13 Million. (9) Our client elected to enter into a contract to sell the property to a REIT for $9,000,000 based upon it's "as is" condition and occupancy with the pending lease. (10) GSP advised the client that if the REIT did not perform he would not have the opportunity of re-purchasing the building at a "bargain price" and that he was also subject to the risk of re-trading. (11) GSP recommended that he buy an "insurance policy" in the form of a "stand-by" commitment. If the sale went through as contracted, the forfeited loan fees would have been far less than the loss of equity if the purchase didn't close. The REIT significantly reduced their offer at the 11th hour. "The Financing Drama": (1) GSP enjoys a relationship with a lender that agreed to work with the borrower and would close even though there were only 20 days remaining on the option and the loan funded on the 20th day. (2) The initial funding of $7,500,000 was more than 100% of purchase price, and included transaction costs and a portion of the leasing commissions. (3) The loan provided for a holdback of $1,750,000 bringing the total commitment to $9,250,000, providing an interest reserve till stabilization, leasing commissions and tenant improvements. (4) The pending lease was approved and the stabilized value should be achieved by mid-year. Loan Terms: (1) Rate: 8.00% Fixed; (2) Initial Funding-Loan to Purchase Price: 107%: (3) Fully Funded-Loan to Stabilized Value: 75%; (4) DCR: 1.25; (5) Term/Amort: 5/25 (6) Recourse: Yes; (7) Lender fees: 1.0% for the stand-by commitment, 1.0% at funding. (Gary M. Tenzer , George A. Smith, James Neuman)

(This lender funded the Transaction of the Week)

Extremely Flexible Portfolio Lender Will Go "Outside the Box" for Commercial Properties: GSP has closed over $50,000,000 with this capital source and has another $50,000,000 in application. This lender will get creative and act quickly (example: SNDA's for the above transaction are being completed post closing). Because the program is recourse to the borrower, lender underwrites sponsor credit to push proceeds and transaction structure. Program Highlights: (1) Loan size: $1,000,000-$30,000,000; (2) Rate: 7.25-8.00%, fixed; (3) Geographic: All of Southern California and major metropolitan areas nationwide; (4) Recourse: Full recourse to a warm body; (5) Term: 5 years; (6) Amort: 20-30 years; (7) Lender Fee: Par to 1.0%; (8) Prepayment: Par transactions-(5,5,5,4,3); 1.0% lender fee-(3,2,1,0,0); (9) 2nd Funding: Lender will fund additional proceeds during loan term for predictable cash flow increases (fixed rent bumps, etc.); (10) "Story" deals OK.

GSP's Chairman, George Smith and CEO, Gary E. Mozer, are in demand in the world of academia. Within the last month: (1) George Smith lectured on commercial mortgage finance to MBA students at UCLA's Anderson School School; (2) Gary Mozer taught a one day class in "Alternative Financing Structures" at ICSC's University of Shopping Centers.

Treasuries: The bond market continues to seesaw on conflicting economic reports and "Fed speak." Thursday's employment data indicated a recovering economy, yields spiked in a bond sell-off. Friday's low consumer confidence and negative industrial production reports indicated a slower than anticipated recovery-bonds rallied, sending the 10 year yield down to 4.86%. "Fed speak" On Thursday, Jack Guynn, president of the Federal Reserve Bank of Atlanta, spoke and warned that the Fed may start reversing the 11 straight rate cuts if a robust recovery leads to inflation. On Friday, Gary Stern, president of the Federal Reserve Bank of Minneapolis, calmed the market by declaring that "subdued" growth may allow for a recovery in which the Fed leaves rates unchanged for some time. Quote: "My foot is not heading for the brake''. Next week: monthly CPI reports, housing starts, leading indicators. CMBS: A $730 million standard conduit pool priced this week, with apartments representing 1/3 of the collateral. Demand was high as the market continues to be liquid, 10 year AAA's priced at Swaps+47. Swaps themselves continued to tighten and are at +70 for the 10 year, back to their pre-Feb. auction level…Stay tuned…(David R. Pascale, Jr.)

George Smith will be speaking at the following law firms this month: (1) February 19: Pircher, Nichols, Meeks; (2) February 26: Munger, Tolles, Olson; (3) February 27: Cox, Castle, Nicholson. For more information on Mr. Smith's speaking availability, please contact Jim Neuman, Director of National Business Development at ext. 112 or jneuman@gspartners.com.