Local Portfolio Lender Drops Floors

$9,100,000 Bridge Loan Refinance (85% LTV) for an 111,449 s.f. Unanchored Shopping Center in Secondary Market in Southern California: This 1983 built center is currently 71% occupied with a vacant 25,550 s.f. anchor space formerly occupied by Sav-On, which is still paying ground rent. It also includes a vacant 6,000 s.f. pad formerly occupied by Wherehouse Records, which went dark as part of the tenant's recent bankruptcy. The borrower built the center. The property has approximately $180,000 in deferred maintenance including parking lot repairs and exterior painting. The purpose of the refinance was to: (1) Pay down existing debt and (2) create a reserve for TI's and leasing commissions for the vacant buildings, even though there are no signed leases. Challenges: Most lenders were not willing to advance additional funds beyond the existing loan balance because the property was not stabilized with deferred maintenance. Solutions: GSP was able to emphasize the positive features of the center, including: (1) 100% occupancy of the in line space (31 spaces), noting that the in line space was only 90% occupied with Sav-On in occupancy in 2001, indicating that the dark Sav-On does not negatively impact occupancy; (2) Prime location with a 65,000 daily car traffic count; (3) Demonstrated demand for the dark Sav-On space with LOI's. Terms: (1) Rate: Prime + 2.5% (8.0% Floor); (2) Term/Amort: 2 years/Interest Only, then 25 year amort for extensions; (3) LTV: 85%, 75% of stabilized value; (4) DCR: 1.20, must go to 1.25 in year 2; (5) Extension options: 2 six-month options for 0.5% each (in loan fee), (6) Non-recourse; (7) Leasing Reserve: Initial funding was $8.4 million with a $700,000 earn-out option to be used for leasing; (8) Other reserves: None. (Michael J. Schwartz).

$7,125,000 Cash Out Refinance (75% LTV--Recorded First Trust Deed, 100% LTV Total) for 2 Northern California Apartment Complexes: GSP has arranged financing for these two apartment properties totaling 152 units. Both were originally constructed as HUD affordable housing projects (Section 8) and are located in secondary markets. The original HUD loan was structured with two tiers (one recorded, one unrecorded) in order to create a tax shelter for extremely high net worth investors (up to 90% income bracket prior to Reagan's tax reform act). Investor tax incentives vanished with the tax reform in 1987, although the investor lower tier wrap notes originally used to acquire these assets could not be paid off or collapsed for capital gains reasons. GSP identified a portfolio lender who was willing to understand that the unrecorded wrap notes could not be paid off through the refinance. The wrap notes remain in place today, post refinance. The recorded first trust deed (new financing arranged by GSP) and the wrap notes combined total 100% LTV. No impounds, no reserves, non recourse, carve-outs limited to the borrowing entity, a SPE. The assets are not cross-collateralized or cross-defaulted. Terms: (1) Rate: 6 month LIBOR + 3.25% (5.50% floor, 2.0% annual maximum adjustment, 5.0% lifetime); (2) Term/Amort: 10/30; (3) LTV: 75% on 1st TD; (4) DCR: 1.30; (5) Lender Fee: 1.0%. (George Smith, David Stepanchak)

Local Portfolio Lender Drops Floors to the Basement! This program is ideal for owners seeking non recourse financing with flexibility for apartment, retail and industrial properties (Note: office is not a preferred product type with this lender). Floating rate floors have been reduced to 4.50%, with a lifetime cap of 9.95%. Program Highlights: (1) Loan Size: $250,000-$4,000,000; (2) Rate: Prime + 0.50% or 6 month LIBOR + 3.25% (4.50% floor); (3) Loan Term: Up to 10 years; (4) Amort: Up to 30 years; (5) Max LTV: 75%; (6) Minimum DCR: 1.25; (7) Pre-pay: 3,2,1,0,0; (8) Lender Fee: Par; (9) Geographic Area: Southern California (Santa Barbara to San Diego counties, including Inland Empire). "Hybrid" Program Also Available: Same general parameters with the following features: (1) Term/Amort: 10/30; (2) Pricing: 5 years fixed at 5.875%, next 5 years floats at 6 month LIBOR + 3.50%, Floor is equal to reset rate, Cap is equal to reset rate + 5.00%; (3) Prepay: 3,3,2,2,1,1,0,0,0,0. Also note: Prepay can be "bought out" (meaning loan is prepayable at any time for no penalty) for a 1.0% lender fee at funding; minimal costs; streamlined process; easy docs.

How High Is the Sky? An Economic, Financial and Legal Roundtable on Southern California Commercial Real Estate. George Smith will be moderating a panel of experts from the brokerage, economic, financial and legal fields. They will discuss emerging challenges and trends affecting Southern California commercial real estate. This program is being co-sponsored by GSP, The Law Offices of Kirkpatrick and Lockhart, Marcus and Millichap and the LA Economic and Development Corporation. When: July 15th, 8:30am-9:00am (networking and continental breakfast), 9:00am-11:30am (panel discussion). Where: Park Hyatt, Century City. More Information: www.kl-events.com/re or 310-552-5087.