2005 MBA COMMERCIAL REAL ESTATE FINANCE CONVENTION

$36,000,000 Bridge Loan on 300,000 s.f. Vacant Downtown Los Angeles Office Building: GSP has arranged bridge financing from a major commercial bank for this property. The property consists of 3 different buildings on two separate legal parcels. The purpose of the loan was to refinance existing debt and establish a reserve for debt service, tenant improvements, leasing commissions, deferred maintenance and carrying costs. The building had been occupied by a credit tenant for 10+ years who recently vacated the property. Borrower had two loans on the project. One of the parcels was encumbered with a CMBS loan at a rate of 8.25% and the other had a portfolio loan at 7.75% fixed. Both loans had 3-4 years left before maturity. Once GSP obtained the loan commitment, the CMBS servicer waived approximately 60% of the yield maintenance prepayment penalty and the portfolio lender waived 100% of the yield maintenance prepayment penalty. Through the financing the borrower achieved the following: (1) Recapitalization of fixed rate loan debt with flexible floating rate debt that can be prepaid at any time upon signing a new tenant; (2) Recapitalization provided reserves for property improvements needed for successful re-leasing; (3) Reduced carrying costs with much lower interest rates and (4) Eliminated a substantial amount of the yield maintenance prepayment penalty. Financing challenges were overcome by the following: (1) Borrower has cash equity in the transaction; (2) Strong borrowing entity with personal guarantees; (3) Tight office submarket and good leasing prospects and (4) Borrower has strong operating experience in this submarket. Terms: (1) Loan Amount: $36,000,000; (2) Floor Funding: $23,000,00; (3) Holdbacks: 1 year interest/carrying cost reserve; $5,000,000 capital expenditure reserve and $6,000,000 TI/LC reserve; (4) Interest Rate: LIBOR + 2.25%; (5) Loan Term: 24 months with a 12 month option; (6) Amort: Interest only; (7) Loan to Stabilized Value: 75%; (8) Recourse; (9) Prepayment: No prepayment penalty; (10) Lender Fee: 0.75%. (Mike Gottlieb)

$14,760,000 (80% LTV) Bridge Financing for 62,000 s.f. Mixed-Use Facility: GSP has obtained 80% LTV, floating-rate financing for a 62,000 s.f. mixed-use facility (health club and retail, plus parking structure) in Southern California. By refinancing the property and defeasing a pre-existing CMBS loan, the borrower was able to (1) gain access to substantial trapped equity, (2) take advantage of low floating-rate interest rates, effectively lowering the mortgage payment despite significantly higher leverage on the property; and (3) fund re-entitlement and redevelopment initiatives facilitated by excess onsite parking in the densely-populated, infill area. Financing Terms: (1) Rate: 30-day LIBOR + 2.35% for initial term; (2) Initial Term: 36 months; (3) Amort: I/O for initial term, 25 year schedule for extension; (4) LTV: 80%; (5) Prepayment: Locked for 12 months, 0.75% exit fee thereafter; (6) Top 20% recourse; (7) Lender Fee: 1%. (Gary Mozer, Lee Norman, Larry Wilemon)

About 20 GSP personnel descended on San Diego earlier this month for the annual commercial lending industry confab. Some notes and observations from our brokers: (1) Familiar refrain from recent years still rings true: “Lots of capital chasing fewer good deals”; (2) ”So much capital that numerous perm debt lenders are advancing their own in-house mezz-debt structure for up to 90% leverage in order to win deals”; (3) “Lot’s of mezzanine programs…also, some new non-recourse construction programs being rolled out”; (4) “What I heard from every lender is that their goals for production have increased over last year 20-40%. I thought it was interesting hearing most lenders wanting bigger deals”; (5) Hottest property type for California: Condo-conversions. Plenty of debt, mezz and/or equity for these projects. (Gene Brunkhardt, Henry Bryan, Lee Norman, David Stepanchak)

STATS! 2004 Loan Originations as Reported by the MBA:

• Office - Recorded the biggest year-to-year increase in loan originations, $26 billion in 2003 vs. $33.2 billion in 2004, a 28% increase. Office originations comprised 25% of all loan production in 2004.
• Multifamily - Largest % of all loan production (37.3%); $50.4 billion in 2004 vs. $48.9 billion in 2003.
• Retail - Nearly $25 billion mortgage originations in 2004 vs. $20 billion in 2003. Retail accounted for 18.3% of all originations in 2004.
• Industrial - Represented 6.8% of all mortgage originations in 2004. Total originations in 2003 - $7.4 billion vs. 2004 - $9.2 billion, a 24.1% increase.
• Hotel - Only a small fraction of loan originations (2.7%) but volume increased 26.2% to $3.6 billion in 2004 up from $2.86 billion in 2003.

Golf Course Financing Available! GSP met with a dedicated golf course lender, owned and operated by veteran originators with 20+ years in the business. Lender if funding permanent and construction loans. Also, will provide Equity for undervalued properties needing capital improvements. Permanent Loan Program Highlights: (1) Loan Size: $2,000,000-$7,000,000; (2) Term: 5 years; (3) Amort: 20-25 years; (4) Rate: 8.5% or Prime + 2.0%; (5) DCR: 1.35; (6) Max LTV: 65% of MAI-SGA appraisal; (7) Collateral: 1st Mortgage, FFE, PG; (8) Prepayment: Yield maintenance. Call for details on construction and/or equity programs.

Mezzanine, “Preferred Equity” Financing for Condo Conversions: Nationwide lender funding condo-conversions with tentative map in place. This high leverage program acts like equity without the participation element. Program Highlights: (1) Loan Amount: $5,000,000-up; (2) Loan to Cost (combined with senior): up to 98%; (3) Target Yield: Low 20% range; (4) Secured by partnership interest; (5) Non-recourse, non-participating; (6) Lender Fee: 1.0%.