10 Year Treasury Hits 5.00%

TRANSACTION OF THE WEEK!

$7,735,000 Fixed Rate, Non-Recourse Permanent Financing for 127,559 Sq. Ft. Industrial Building in Rancho Cucamonga, CA. GSP arranged permanent financing for the acquisition of a 127,559 Sq. Ft. Class-A, industrial building located in Rancho Cucamonga, CA. The acquisition was for a shell building under construction and substantially completed on March 16, 2006. The property will be 100% leased to two tenants at the close of escrow and 100% occupied as soon as the tenant improvement work is completed. Any tenant improvements required are the responsibility of the borrower. The lender held back a portion of the loan for tenant improvements not completed, tenant improvement allowances due tenants and any free rent due tenants. Terms: (1) Rate: 10 Yr Treasury + 1.20%; (2) Term: 10 Yrs; (3) Amort: 30 yrs; (4) LTV: 80%; (5) Non-recourse; (6) Prepayment Penalty: Locked out for the earlier to occur of 4 yrs from date of note or 2 yrs after securitization. Defeasance thereafter; (7) DCR: 1.20; (8) Lender Fee: Par. (Gary E. Mozer, Lee T. Norman, Steven C. Orchard, Gil Barkon).

$5,320,000 Non-Recourse Acquisition/Bridge Financing for Mixed Use Apartment and Retail Property. GSP arranged a $5,320,000 bridge loan for a three story, 9,336 net rentable Sq. Ft. building built in 1911. The property is located on the world famous Venice Beach Boardwalk and only steps from the sand and surf. The property will be converted into fully furnished “corporate suites” and leased out short term to increase revenue. It has two retail and 12 apartment units. All 12 apartment units were remodeled and updated in the last two years and are exempt from rent control. One of the retail tenants is an operating restaurant that was also acquired as part of the transaction. Terms: (1) Pricing: 90 day LIBOR + 3.50%; (2) Loan Term: 2 yrs; (3) Amort: Interest Only; (4) Non-recourse; (5) LTC: 70%; (6) LTP: 80%; (7) Lender Fee: 1%; (8) Extension option: 1 yr; (9) Extension Fee: 1%; (10) Exit Fee: 1%; (11) Prepayment: 1 yr lockout period. (Andrew Levant, Gilda Rivera)

$3,900,000 Fixed Rate Bridge Financing with Construction Loan Option for a 33,563 Sq. Ft., 523 Unit Self Storage Building and Wendy’s (Leasehold) Located in Southern California. The borrower intends to develop an additional 63,000 Sq. Ft. of new self storage space at the property, adding another 480 units. GSP arranged a fixed rate bridge loan with flexible prepay, allowing borrower to eliminate rate risk while preparing for the new construction. Terms: (1) Rate: 5 yr T + 1.75%; (2) Loan Term: 4 yrs, 1 yr; (3) Amort: 25 yrs; (4) LTV: 70%; (5) DCR: 1.25; (6) Lender Fee: 0.50%; (7) Option: 1 year extension option, (an additional 0.25% if the extension option is exercised), Recourse, Lender has right of first refusal for intended $5.6 million construction loan scheduled for early 2007. (8) Prepayment Penalty: 1.00% in year 1, Par thereafter (Michael Schwartz, Kevin Holliday).

$3,400,000 Mezzanine A&D Loan (Funded in Two Weeks) for 30 Acres in the Pacific Southwest: GSP arranged a quick-close mezzanine loan for a client acquiring 30 acres for the development of 92 single-family homes. The land will be entitled at acquisition but our sponsor will be responsible for all lot and infrastructure build-out. The $3,400,000 was originally committed from an equity investor who decided not to move forward with the investment at the eleventh hour. GSP was able to identify a lender that was able to underwrite the transaction in 24 hours and fund in two weeks. While the sponsor would have preferred not to lose his equity investor at this late date, the mezzanine debt alternative offered a less expensive capitalization (Allison Higgins, David Stepanchak).

HOT MONEY

Boutique Bank Funding “Story” Transactions Nationwide. Almost 100% of their assets fund real estate loans – mortgages and income-producing or potentially income-producing transactions. About 60% of their real estate lending portfolio is local; the other 40% is spread among several states nationwide. They provide short term, variable funding for all property types. They can provide 65% of acquisition cost on unentitled land. Can close quickly – often in just a couple weeks. Highlights: (1) Deal Size: Up to $20,000,000 (beyond requires syndication); (2) Rate: Prime based, variable rate; (3) Loan Term: 1-3 years with extension options (3 years is preferred maximum); (4) Amort: Interest Only; (5) LTV: 80%; (6) LTC: 90%; (7) Typically Full Recourse, partial recourse negotiable; (8) Property Types: All; (9) Land: Will lend 65% of acquisition cost on unentitled land, 75% of appraised value on entitled land; (10) Prepayment: No prepayment penalty or yield maintenance; (11) Fees: Range from 1.00%-5.00% depending on the transaction; (12) Geography: Nationwide.

INTEREST RATES

10 Year Treasury Hits 5.00%, Highest Since 2002 Continued “hot” economic reports and real, anticipated or imagined inflation has driven the yield up dramatically in the last few weeks. What about floating rates? LIBOR and Prime are rising with each Fed announcement (the LIBOR rate hikes lag Prime slightly).What about spreads? CMBS spreads have remained constant, with some tightening for high leverage. Speaking of high leverage, we are also seeing some lenders pushing leverage to over 80% and down to 1.15 DCR, with cap rates staying low, it’s the only way to make some deals work. Will cap rates rise now that rates have risen? Stay tuned… (David R. Pascale, Jr.)

WE’RE MOVING

George Smith Partners is moving to a new location on May 15, 2006. Our new address will be:
10250 Constellation Blvd., Ste. 2700  *  Los Angeles, CA  90067
Phone numbers and email addresses will remain the same.