Forty Year Amortization Product for Multifamily

TRANSACTION OF THE WEEK!

$28,000,000 Bridge Financing for Unentitled Land. GSP arranged financing with a commercial bank for two adjacent land parcels totaling 333.5 acres in Southern California. The borrower will entitle the land for mixed use residential/commercial development, build out the residential component, and sell off the commercial section. The lender was interested in the transaction primarily because of borrower’s financial strength and personal guarantee. The lender performed exactly on the terms applied for, including (1) closing the loan in 45 days, (2) allowing subordinate financing, and (3) not requiring an interest reserve. Terms: (1) Rate: Prime + 0.50%; (2) Term: 12 months, with two 6 months extensions; (3) Amort: Interest Only; (4) LTV: 60%; (5) Full Recourse; (6) Lender Fee: 0.5%. (Steve Bram, Farzin Emrani)

$18,500,000 (99.8% LTC) Non-Recourse Condominium Conversion Financing. GSP arranged $14,600,000 of senior debt (80% LTC) and $3,400,000 of mezzanine financing (18% LTC) for the conversion of a 90 unit multifamily property on the West Coast. The loan structure included no lender profit participation or “waterfall.” Lender returns were structured as exit fees and/or minimum interest. Challenges: (a) Potential engineering remediation to be completed after close of escrow; (b) A going-in price and cap rate that would not have worked if the units were to remain as rentals; and (c) Structuring a “wedge equity” investor to provide 90% of the developer’s $600,000 equity contribution. Terms: (1) Pricing: Senior: 1-Month LIBOR + 2.75%; Mezzanine: 12% (for a blended rate at closing of 8.79%) (2) Term: 12 months; (3) Amort: Interest Only; (4) Non-recourse; (5) Lender Fee: Senior: 1% ; Mezzanine: 1.5%. (Gary E. Mozer, Lee Norman, Larry Wilemon, David Bierman)

HOT MONEY

Forty Year Amortization Product for Multifamily Portfolio Loans. This fixed rate portfolio loan program features streamlined documents, flexible prepay or yield maintenance (no defeasance), and 3 to 10 year loan terms. “Easy” borrower documentation includes: no tax return required, financial statement, schedule of RE only. The 40 year amortization allows borrowers to maximize their investment opportunities. Works best for properties with market level rents. Right now 10 year is priced best (6.13% for yield maintenance or 6.30% for prepay schedule of 5,5,4,3,2,1,1,0,0,0 then par) Program Highlights: (1) Transaction Size: $1,000,000-$10,000,000; (2) Rates: 6.13% - 6.75%; (3) Loan Term: 3, 5, 7 yr fixed; (4) Amort: 40 yrs; (5) Max LTV: 75%; (6) Max LTC: 75%; (7) Min DCR: 1.15; (8) Non-Recourse; (9) Property Types: Multifamily; (10) Prepayment: Yield Maintenance or Ste p Down; (11) Fees: Par; (12) Geography: Nationwide.

INTEREST RATE/CMBS UPDATE!

Continued slow economic news surprised traders and led to further rallying, pushing the 10 Year T down to 4.54%. Today it sits at 4.59% with the 5 Year at 4.55%, very tight yield curve. Floating rates are “out of synch” as LIBOR remains above 5.30%, has LIBOR peaked? If so, when will it start moving down? Most believe it will move in near lock step with the Fed overnight rate, so when will the Fed start cutting? Stay tuned... (David R. Pascale, Jr.)