Is Your Property 'In the Zone?'

TRANSACTION OF THE WEEK!

$16,500,000 (85% LTC) Non-Recourse Bridge Loan for a Vacant Industrial Building in Sun Valley, CA. GSP arranged a bridge loan for a 140,000 Sq. Ft. vacant industrial building to be re-configured into 20 “ for sale” industrial condominium units. The property is situated adjacent to the Burbank Airport and the market has a nearly zero percent vacancy factor. The lender provided the necessary dollars for the borrowers to execute their business plan utilizing an earn-out structure with no negative arbitrage. The lender will also allow partial releases of the collateral upon the sale of the condominium units. The loan funded the acquisition and closing costs and balance held back for pre-development cost, hard cost and interest reserve. Terms: (1) Pricing: 8% (fixed) for months 1-12, reset at Libor + 3% for months 13-18; (2) Loan Term: 18 months; (3) Amort: Interest only; (4) Non Recourse; (5) LTC: 85%; (6) Lender Fee: 1.50%; (7) Extension Option: two 6 months; (8) Extension Fee: 0.50%; (9) Exit Fee: 0%; (Andrew Levant, Gilda Rivera).

$11,070,000 (100% of Cost) Financing for Entitled Land in Kapolei, Hawaii. GSP arranged $11,070,000 of land acquisition financing for 22 acres of entitled, industrial zoned land in Kapolei, about 15 miles from downtown Honolulu. There is a 2% overall vacancy in Oahu industrial property. The transaction was highly atypical; the lender’s sole collateral is a pledge of a prospective ground lease which gives the buyer an option to acquire the fee interest in the land at a significant discount to market value. Because the loan was not collateralized by real estate, and the existing parcel is not already subdivided, it was clear that this financing would not fit a traditional lender. GSP arranged the 100% of cost financing with a private family trust. Terms: (1) Pricing: 17%, all accrued, no participation; (2) LTV: 54.5% of as-is value of the fee interest; (3) LTC: 100%; (4) Loan Term: 12 months with one 12-month extension option; (5) Amort: Interest only; (6) Non Recourse; (7) Lender Fee: Par. (Gary M. Tenzer, Aaron Wright).

$5,600,000 Permanent Financing for 34,841 Sq. Ft. Single-Tenant Office. GSP arranged permanent financing to facilitate the acquisition of a 34,841 sq. ft. single- tenant built-to-suit office/industrial building in Santa Rosa California. The tenant is a national subsidiary of a publicly traded entity, but is not investment grade. The newly built structure was developed for the tenant and leased pre-construction. Challenge: The tenant’s lease includes a five year termination option. Solution: The lender agreed to eliminate reserves by sweeping the termination penalty. Challenge: The original lender backed out of the transaction in due diligence, citing weak market fundamentals; closing was subject to 1031 exchange rules and a fixed closing date. Solution: GSP secured a replacement lender with comparable terms and closed on schedule. Terms: (1) Rate: 6.85%; (2) Term: 8 yrs; (3) Amort: 30 yrs; (4) LTV: 75%; (5) LTC: 90%; (6) DCR: 1.15; (7) Non Recourse; (8) Prepayment Penalty: Yield Maintenance; (9) Lender Fee: Par. (Steven C. Orchard).

HOT MONEY

Is Your Property "In the Zone?” It May Qualify for One Stop Shop Construction and Mezz up to 90% of Project Cost. Nationwide Lender providing combination high leverage financing for the four major product types for eligible tax credit zone deals. You may not know that your property is eligible for this program. Over 40% of real estate in the US is eligible, including (for example) parts of West Los Angeles, Santa Monica and the Las Vegas strip. Contact us with property address to determine eligibility. Highlights: (1) Pricing: Construction: LIBOR + 1.25-2.00%; Mezz: LIBOR + 5.50-8.50% (Rate is blended); (2) Max LTC: 90%; Senior loan is typically 75-80% of total project cost; Mezz up to 90% of total project cost; (3) Lender Fee: 1.0-1.25%; (4) Recourse on senior loan; (5) Product type: Apartments, retail, office, industrial. No condos or for-sale housing; (6) Geography: Nationwide.

INTEREST RATE UPDATE!

Treasuries/CMBS: More bond market rallying occurred this week on further evidence of low inflation and speculation that the Fed is “ finished” raising rates. The 10 year dropped to 4.84%!! The 10 year SWAP continued to narrow to 52 (in from the low 60’s just three weeks ago). AAA ’s stayed tight. All in mortgage rates for new transactions are back down to 5.75-5.90%. Stay tuned… (David R. Pascale, Jr.)

SPEAKERS CORNER

David Rifkind, GSP Principal/Co-Managing Director, will be addressing the Corporate Finance Group of the global consulting company, FTI Consulting on August 22, 2006. Mr. Rifkind will be sharing his insights on current trends in the real estate capital markets.