Bear Stearns Chief Economist John Ryding

$40,800,000 Refinance for 5 Property Retail/Apartment Portfolio: GSP has arranged financing for an institutional client as part of an overall corporate recapitalization. The borrower is a charitable trust which owns several well-known beverage brands. Lender performed quickly, committed in 1 week (with reports in hand), and closed within 3 weeks after commitment. Portfolio was cross-collateralized with no release provisions.

PROPERTY SPECS. (Loan Amount in Bold)

(1) $11,200,000 - Grocery anchored shopping center, 107,000 s.f., 7 buildings, south Orange County, built in 1981, 100% occupied, 25 tenants.
(2) $9,450,000 - Grocery anchored shopping center, 87,000 s.f., West Los Angeles, built in 1974, 98% occupied, 30 tenants.
(3) $6,500,000 - Grocery anchored shopping center with 2nd story offices, 60,000 s.f., San Gabriel Valley, built in 1956, grocery store built and center remodeled in 1981, 85% occupied, 12 tenants.
(4) $3,950,000 - 60-unit multifamily complex on 2 legal lots, one loan, City of Orange, 100% occupied, 1960's vintage, lots of outdoor green space.
(5) $9,700,000 - Fee interest on a 160,000 s.f., single-tenant discount retail, San Francisco, ground lease term: 60 years, flat for first 17 years, CPI and % rent increases thereafter.

Terms: (1) Rate: 5 year T + 2.39%; (2) Term/Amort: 5/30; (3) LTV: 65%; (4) DCR: 1.60%; (5) Lender Fee: Par. (Andy Levant)

Levant Completes Financing "Hat Trick" with $6,850,000 ($342,500/Unit) Permanent Loan on Award-Winning, 20-Unit Courtyard Apartment Complex in West Hollywood: Andy arranged financing on this property for the 3rd time (Jan 2000: $5,6000,000 construction loan, July 2002: $6,700,000 bridge loan, new perm). The distinctive Spanish revival style building features 20 custom residences, each with separately accessed home office, multiple courtyards, 7 custom fountains and community spa. The property fits in among neighboring historic apartment buildings and has been written up in several magazines. Appraised at $525,000/unit, 90% occupied at funding. Loan amount per unit is among the highest ever seen here at GSP. Terms: (1) Rate: 10 year T + 1.80%; (2) Term/Amort: 10/30; (3) LTV: 70%; (4) DCR: 1.40; (5) Non-recourse; (6) Par. (Andy Levant)

Bear Stearns Chief Economist John Ryding Delivers Economic Briefing at Luncheon II of the 2003 GSP Executive Luncheon Series to Benefit the A-T MRF: (1) Deflation: Is there a Risk? What are the Consequences? "For the first time in my recollection you have the Central Bank of the United States telling us that it doesn't want inflation to go any lower." Inflation was a fact of life until Fed took a stand in the mid 1980's. Now a Japan style deflation is worrying Greenspan and would have a negative impact on real estate. The U.S.'s only period of deflation occurred in the 1930's in the wake of major tightening by the Fed. Deflation is not an issue, Core PCE Deflator indicates we are in a period of low inflation. Prediction: No deflation, interest rates will rise after hitting lows over the next 3-6 months. (2) The Fed raised rates to stave off inflation from 1996-2000 (except during the 1998 Long Term Capital crisis). The policy squeezed profits of major companies as the Fed made the choice against growth to restrain perceived inflation risk; (3) 2001 Recession: Unusual recession as it originated from the business sector itself as companies reduced capital spending and the monetary environment prevented them from getting traction on pricing; (4) Early Indicators of Changes in Monetary Conditions: Gold prices (fell by $150/oz from 1996-2000); same with commodity prices, the foreign exchange value of the dollar rose-all indicated downward pressure on prices. However, recently gold and commodity prices are rising and the dollar is weakening, this indicates rising prices in the future. (5) The Fed may drop the Fed Funds rate to 1.00% or even 0.75% (unprecedented). (6) Unemployment is at 6.00%, Fed is concerned and probably will not raise rates until unemployment comes down. Early 1990's recession peaked at 7.8%. Perhaps the jobs picture is better than the numbers indicate. (7) Oil Prices have fallen, each $10 drop in per barrel price boosts U.S. GDP growth by 0.5%. Bear Stearns oil analyst believes price is going down to $18 per barrel. (8) 1991 Recovery was slower than this one, Fed raised rates in 1994 to fight inflation, bond market was caught off guard (Oct. 1993 10-year T: 5.77%, Dec. 1994: 8.2%); (9) Corporate Bond Spreads are tightening, stock market is rallying, early indicators of faster growth; (10) Treasury market is out of synch, take advantage of the present low yields. Prediction: 5.5% 10-year T in 2004.