$30MM for West Los Angeles High-Rise

$30MM for West Los Angeles High-Rise Congregate Care ($10MM+ Cash Out With No Increase in Debt Service - 10 Years Interest Only, 59% LTV): George Smith Partners placed its 3rd loan on this exceptionally well performing property which enjoys absolute barriers to entry in a prime Los Angeles location. Over the past seven years, the property cash flow has grown at a 7% compounded rate. Cutting Edge Investment Grade Pricing: With a loan request of less than 60% LTV, coupled with the strong property fundamentals including: (1) consistent operating performance, (2) affluent tenant profile and (3) more than 30 years of continuity of ownership (the loan received “investment grade” pricing). As a rule of thumb, higher quality congregate care properties price at 15 to 20 bps. over similar quality conventional apartment loans. MAI appraisers confirmed that congregate care cap rates are 1.5% to 2% higher than cap rates for similar quality apartments. With apartment cap rates for the larger properties in this submarket at or below 5%, the appraisers indicated that a 7.5% cap rate would be appropriate even though this was 2.5% above current multi-family caps. Sizing and Loan Underwriting: The underwriting template was similar to multi-family, i.e. (1) 3 years historical, (2) 12 months trailing, (3) current stabilized pro-forma adjusted for capital expenditures and property physical condition. The stabilized annual cash flow was determined to be in excess of $3.9 million and the MAI value exceeded $50 million resulting in a sub-60% LTV. Refinancing: A FNMA first mortgage placed by GSP in 1996 and a FNMA second placed in 2000 totaling approximately $18 million were paid off in addition to yield maintenance. FNMA had originally rejected the loan request because of policy guidelines stating that “all congregate care units must have kitchens.” FNMA issued a waiver once they visited the property and understood: (1) the average tenant is 87 years old, (2) at this age, tenants should not be cooking and should be in a group social setting three times per day, (3) the property has no assisted living, no special licensing requirements and no nursing home component, (4) all tenants are ambulatory and (5) there are no rent subsidies. Loan Terms: (1) Rate: 10 year T + 1.05%; (2) Term: 10 years; (3) Amort: Interest only; (4) LTV: 58%; (5) DCR: 2.06; (6) Non-recourse; (7) Lender Fee: Par. (George Smith, David Stepanchak, Jim Smith)

$10,160,000 Redevelopment Loan (97% of All-In Costs) for a 120,613 s.f. “Fashion Anchored Value Oriented” Shopping Center in Sacramento, CA: This 1986 built, multi-tenant center had been anchored by an 89,000 s.f. Kmart with an additional 18 side shops spaces ranging from 900 s.f. to 5,000 s.f., and a 5,000 s.f. free-standing pad building. In addition, a 55,000 s.f. Raley’s Food Source grocery store shadow anchors the center. The property was 100% occupied for many years prior to Kmart’s bankruptcy filing in June 2002. At that time, Kmart went dark and stopped paying rent, leaving the center 25% occupied. The borrower commenced a re-tenanting effort and achieved 58% lease up of the center prior to loan application signing, and also achieved 76% leasing prior to loan closing to meet a 75% leased closing requirement. Borrower is subdividing the former Kmart space with four new major tenants: dd’s Discount a subsidiary of Ross Stores, Anna’s Linens, Fallas Peredes and Susie’s Deals. Loan proceeds were 97% of all costs including: (1) Payoff of existing loan; (2) Re-leasing and renovation costs; (3) Interest Reserves; (4) All closing costs and fees. Challenges: (1) Existing financial structure has the borrower as ground lessee with the ground lessor holding the first mortgage on the improvements. However, a clause in the ground lease states that upon loan payoff, the ground lease could not be encumbered again in the future! (2) Existing lender filed a NOD in June 2003 and a Notice of Trustee Sale in March 2004. Solution: GSP and borrower demonstrated to the existing lender that a refinance of the ground lease was impossible since a mortgage was prohibited and it would require a loan collateralized by the partnership interests of a 25% occupied center. GSP demonstrated this by sharing feedback from the mezz lenders that Michael Schwartz spoke to during the NOD and trustee sale filings. (3) A purchase of the fee title to the property was subsequently negotiated by the borrower, which made this refinance possible. (4) This Sacramento submarket experienced an outflow of credit tenants between 1995 and 2003 as newer retail developments emerged in the nearby Elk Grove submarket. (5) A couple of the new anchor leases have co-tenancy and cancellation clauses based on gross sales. GSP also demonstrated strengthening of the local trade area despite decline in the submarket; due to a prime location a block from Freeway 99 on the main arterial. Terms: (1) Rate: Prime +2.00%; (2) Term/Amort: 2 years/Interest Only; (3) LTV: 75%; (4) Extension Options: 2 six-month options for 1.0% each (in loan fee); (5) Recourse; (6) Prepayable at any time at par; (7) Lender Fee: 2.0%. (Michael Schwartz)