CONGRATULATIONS TO GSP'S NEWEST PRINCIPAL

CONGRATULATIONS TO GSP’S NEWEST PRINCIPAL, MICHAEL SCHWARTZ

George Smith Partners is pleased to announce that Michael Schwartz has been made a new principal of the firm. Michael joined GSP in 1997, initially working with George Smith and eventually developing his own book of business with a loyal client base, as well as a strong and trusted base of third party vendors and business broker referral sources. Michael has arranged over $1.5 billion in conventional, structured, and unconventional financing transactions. Some of the highlights have included (1) numerous 100% of cost construction and land development loans, (2) a letter of credit facility creating a 1% interest rate for the borrower, (3) refinance and acquisition loans for vacant or near-empty properties, (4) farm loans and crop lines of credit, (5) three day loan closings (from borrower’s first call to Michael until funding), an eight business day loan closing with an institutional lender, and many 30 day closings with institutional lenders. Michael also enjoys intellectual pursuits and has created numerous, sophisticated financial templates in Excel which have been adopted by GSP as well as have been recognized by industry experts for their elegant and simplistic modeling techniques. Michael co-authored a book about JV equity modeling in Excel with Dean Altshuler, Phd. and CFA.

Michael has been teaching and developing GSP’s credit and underwriting training program for the company’s analysts and associates. Michael received his undergraduate degree from the University of Michigan and has an MBA in finance and real estate finance with Honors from Columbia Business School. Michael and his wife Sandra Koutal Schwartz are expecting twins in July.

TRANSACTION OF THE WEEK!

$41,000,000 Construction Completion Facility Funds in 10 Days. GSP created a customized solution for a San Diego based home and resort developer that freed up working capital. The 5 year, interest only bridge loan took out an institutional construction and mezzanine loan on a 70% complete 179 town house project. The facility provided additional funds to complete the project and a redesigned released schedule that will allow the sponsor immediate cash out on the first closings to use toward another project. Terms: (1) Fixed Rate; (2) Term: 5 yrs; (3) Amort: Interest-only; (4) Non-recourse. (David Rifkind, Henry Bryan)

Use GSP/Rifkind’s quick-close capability to create value in your transaction. For more info, contact David Rifkind (ext. 130, drifkind@gspartners.com)

$9,000,000 in High-Leveraged Second Mortgages for Apartment to Condo Conversion Projects. These are three nearly completed conversions in San Diego, CA totaling 216 units. The conversions are on average 75% completed. Thirty seven condos have sold, with 56 additional units in escrow. The borrower desired to quickly monetize some of the equity in the unsold condo units. Our second mortgage lender was able to get comfortable with the deals based on the borrower’s track record of success in the area. The loans were approved in one business day and closed within two weeks. The closing delay related to working out the inter-creditor agreements with the first mortgage lenders and the seven sets of lawyers involved (each first mortgage lender had in-house and outside counsel, and our lender had their own lawyers). Terms: (1) Interest Rate: 18%; (2) Loan Term: 1 yr; (3) Amort: Interest Only; (4) LTV: 78%; (5) Combined LTC with first mortgage: 94%; (6) Recourse; (7) Prepayment Penalty: None; (8) Lender Fee: 10%; (9) Other: Two of the properties were cross collateralized and required 100% cash flow to pay down the debt, one property had favorable release prices. (Michael Schwartz, Kevin Holliday).

$3,000,000 Fixed Rate, Non-Recourse Permanent Financing for 35,032 Sq. Ft. Office Building in Sandy, UT. GSP arranged permanent financing for the acquisition of a three-story, 35,032 Sq. Ft. office building built in 1998 and located in Sandy, UT. The acquisition is 84% occupied by four tenants. The release of all funds was contingent upon the renewing of the previous owner's lease of 48% of the space. Terms: (1) Rate: 10 Yr T + 1.35%; (2) Term: 10 yrs; (3) Amort: 30 yrs; (4) LTV: 75%; (5) Non-Recourse; (6) Prepayment Penalty: Defeasance; (7) DCR: 1.20; (8) Lender Fee: Par. (Larry Wilemon, David Bierman)

$6,150,000 Fixed Rate, Non-Recourse Permanent Financing for 48,800 Sq. Ft. Retail Shopping Center in Lancaster, CA. GSP arranged permanent financing for the acquisition of a 17-tenant, 48,800 Sq. Ft. retail shopping center located in Lancaster, CA. The property was 86% occupied. The lender overcame the available 6,900 Sq. Ft. space recently vacated by the anchor tenant by holding back a portion of the loan until the available space is leased. Terms: (1) Rate: 10 Yr Treasury + 1.45%; (2) Term: 10 yrs; (3) Amort: 30 yrs; (4) LTV: 77%; (5) Non-Recourse; (6) Prepayment Penalty: Defeasance; (7) DCR: 1.20; (8) Lender Fee: Par. (Larry Wilemon, David Bierman)

$4,600,000 Fixed Rate Financing for 186,868 Sq. Ft. Owner-User Industrial Facility in Inland Empire, CA. GSP arranged $4,600,000 in fixed rate, permanent debt on an owner-user manufacturing and storage complex in the Inland Empire. The collateral consists of two structures on two adjacent parcels: a 128,173 Sq. Ft. factory and a 58,695 Sq. Ft. warehouse. Challenges: (1) lack of a strong borrower operating history; (2) possible environmental concerns with the site. Solutions: These issues were overcome by emphasizing the sponsor’s attractive net worth, the transaction’s conservative leverage, and the overall strength of the inland empire industrial market. Terms: (1) Rate: 10-Yr Treasury + 1.21%; (2) Term: 10 yrs; (3) Amort: 30 yrs; (4) LTV: 65%; (5) DCR: 1.35; (6) Recourse; (7) Prepayment Penalty: 3 yr lockout then defeasance; (8) Lender Fee: Par. (Gary M. Tenzer, Aaron J. Wright)

$3,000,000 Permanent Loan (60% LTV) on an 11,449 Sq. Ft., 100% Occupied Community Shopping Center in Manhattan Beach, CA. GSP arranged a $3,000,000 permanent loan to refinance an 11,449 Sq. Ft., 100% occupied community shopping center in Manhattan Beach, CA. Terms: (1) Rate: 10 Yr T + 1.30%; (2) Term: 10 yrs (2 yrs interest only); (3) Amort: 30 yrs; (4) LTV: 60%; (5) Non-recourse; (6) Prepayment: Defeasance; (7) Fees: Par. (Gary E. Mozer, Lee T. Norman, Mike Sullivan)

$1,300,000 Variable Rate, 52% LTV, .80 DCR, Recourse Acquisition Financing of 5-Unit Beverly Hills Property. GSP arranged bridge acquisition financing of property that client will develop in approximately 1 year. Though 52% is a low LTV, higher acquisition funds at comparable rates were not available. Terms: (1) Rate: 12 MTA + 2.75% ; (2) Term: 30 yrs; (3) Amort: 30 yrs; (4) LTV: 52%; (5) LTC 52% ; (6) DCR 0.8 : 1; (7) Recourse; (8) Prepayment Penalty: 1.5% first 3 yrs then open; (9) Lender Fee: 0.25%. (James Smith)

HOT MONEY

Construction Lender Providing Up to 85% LTC, LIBOR Based Loans Nationwide. Many developer borrowers prefer LIBOR based pricing these days instead of Prime. This lender can fund loans from $2,000,000 up to $200,000,000 without outside participation. They like the Big Four property types, but will consider others. Will consider land if there’s construction in the next 12-18 months and they get first look. Highlights: Deal Size: $2,000,000-$200,000,000; Rate: LIBOR + 2 .50 % -3.25%; Loan Term: 1-3 yrs; LTC: 85%; Recourse, will consider partial recourse; Property Types: Multifamily, Office, Retail, Industrial, Condos, Hotels and others; Geography: Nationwide.

INTEREST RATE WATCH

Is May 10 the “end for now”, “a pause” or is there more to come? All eyes will be on the Fed commentary this week as a 0.25% rate hike is expected, but then what? The market and the media still learning to interpret the new Fed Chairman’s comments. This was apparent during last Monday’s bond market slaughter after he clarified remarks to CNN’s reporter. Floating Rates: So, Prime will hit 8.00% this week and a typical Prime + 1.00% construction loan will approach 10% (see Hot Money for a LIBOR based construction lender), lagging bridge loan indices such as 12MAT are inching upward at a slower pace due to the methodology used in determining them. Fixed Rates: Treasuries rallied slightly on Friday due to slow hiring, the 10 Year closed at 5.10%. Some CMBS lenders are pushing proceeds on desirable transactions with (1) A/B structures; (2) Underwriting to 1.15 DCR on actual rate (stress constants seem to be a thing of the past, like thermal paper fax and VCR’s) and 85% LTV or LTC. Stay tuned….. (David R. Pascale, Jr.)

WE’RE MOVING

GEORGE SMITH PARTNERS, INC.
is pleased to announce the relocation of its office:
Effective May 15, 2006
George Smith Partners, Inc.
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
Phone: (310) 557-8336  -  Fax: (310) 557-1276
www.gspartners.com