Hurricane Katrina - affect of the disaster - FINfacts

KEY RATE INDICES

FANNIE MAE RATES *

Prime Rate	6.50%
CODI*	1.693%
3 Mo. T’s (YTM)	3.52%
6 Mo. T’s (YTM)	3.82%

5 Yr. U.S. T’s	4.02%
10 Yr. US T’s	4.24%
30 Yr. US T’s	4.55%
12-MAT	3.019%

LIBOR - 1 mo.	3.81%
LIBOR - 3 mo.	3.92%
LIBOR - 6 mo.	4.07%
LIBOR - 1 yr.	4.25%

Tier 2++ (80% LTV)	5.47%
Tier 3++ (65% LTV)	5.33%
Tier 4++ (55% LTV)	5.19%
10 yr. term/30 yr. amort.

TRANSACTION OF THE WEEK

$42,000,000 with $9.1M+ Cash Out Refinance for Industrial Park in Northern CA. GSP arranged $42,000,000 in permanent financing for a 2,300,000 s.f. industrial park on a 335 acre land lease. The property was acquired in 2000 with the first of two high-leverage bridge loans and one floating rate permanent loan, all arranged by GSP, before the borrower seized the opportunity to extract equity and lock rate on historically low treasuries. The borrower was able to take out $9,100,000+ and maintain plentiful cash flow with this 65% LTV loan. GSP negotiated the ability to add mezzanine debt at a later date for 2 bps, and arranged a 9 year structured term to coincide with the land lease purchase option. Borrower also has the ability to have significant pieces of the collateral released for future development at no cost. The entire redevelopment of the property was perfect textbook execution of a value added real estate business plan. Terms: (1) Rate: 4.96%; (2) Pricing: T+.98; (3) Term/Amort: 9/30; (4) LTV: 60%; (5) DCR: 1.70; (6) Non-Recourse; (7) Lender Fee: Par. (J.Jay Brooks)

$6,400,000 (65% LTV) Fixed Rate Financing for 200 Room Hotel on Leasehold. Subject property is an unflagged, San Francisco hotel built in 1911. GSP was engaged to secure bridge financing for the new owner. The loan involved significant structuring, because of variables including: (a) the property sits on a ground lease with less than 40 years remaining; (b) the asset has been underperforming in recent years, which culminated in a default of payment obligations by the previous owner; (c) significant capital expenditures are necessary in order to bring the property in-line with its competitive set; and (d) sponsorship did not have direct hotel ownership and operating experience. Terms: (1) Pricing: Prime + 1.00%; (2) Term/Amort: 7/23 (2 years I/O); (3) LTV: 65.00%; (4) DCR: 1.35; (5) Prepayment: 3%-open; (6) Recourse; (7) Lender Fee: 0.50%. (Gary Mozer, Lee Norman, Larry Wilemon).

$1,940,000 Permanent Loan fixed at 5.42% on a 20,252 square foot Medical Office Building in Long Beach. The 1960s vintage building operates under a ground lease and will experience 100% lease-roll during the loan term. The loan provides a substantial cash distribution to the borrower. Terms: (1) Rate: 10 Year T + 1.15%; (2) Term: 10 years; (3) Amort: 1 Year Interest Only, then 30 years; (4) LTV: 75%; (5) DSCR: 1.20%; (6) Lender Fee: Par; (7) Recourse: Non-Recourse; (8) Reserves: $0.50 per square foot annually for capital expenditures, with a $100,000 letter of credit in-place of TI/LC reserves; (9) Secondary Financing: Permitted up to 80% LTV at no cost. (Steven C. Orchard)

George Smith Partners extends is deepest sympathy to the victims of Hurricane Katrina. In the midst of this devastating tragedy, our thoughts are first with the victims. We would like also to comment on the affect of the disaster on interest rates.

INTEREST RATE UPDATE

Treasuries yields spiked due to inflation fears, the 10 year is at 4.24%. Hurricane Katrina could affect yields as the government is issuing approximately $30 billion in new treasuries to pay for the ongoing relief effort. Other effects: the Fed may ease up and “skip” their usual 0.25% increase in short-term rates at the next meeting so as not to tighten credit in the early recovery stage. That may put less pressure on short-term rates including LIBOR (and Prime, of course). Also, demands on building materials may prove inflationary which could further tighten margins and returns on construction projects nationwide.

11th Annual GSP Real Estate Luncheon

To Benefit the A-T Medical Research Foundation

Wed., September 21, 2005
Westin Century Plaza Hotel & Spa

FEATURED GUEST SPEAKERS
Bruce Karatz
KB Home

Itamar Rabinovich
President of Tel Aviv University

Register at www.gspartners.com

If you have received this e-mail in error, wish to change your e-mail address or want to be removed from our list, click here.