Scott Bottles Joins George Smith Partners As Principal

THANK YOU FOR A GREAT YEAR - SO FAR!

GSP is pleased to announce that we have placed $3 Billion in debt and equity so far this year. At this time last year, we had placed $2.05 Billion, and ended the year with $3.5 Billion. We are on track to meet our 2006 production goal of $4.5 Billion.

Thank you to all of you who have trusted us with your financing needs and to all of you who provided the capital to help us meet them.

TRANSACTION OF THE WEEK!

$71,900,000 (99.8% LTC) Non-Recourse Condominium Conversion Financings. GSP arranged $57,500,000 of senior debt (80% LTC) and $13,100,000 of mezzanine debt (up to 98% LTC) for the conversion of almost 200 units at two West Coast properties. Lender profit participation was structured as a “waterfall”, up to 65%-35% (developer-lender). Challenges: (a) Negotiating developer’s fees and construction management fees into the transaction; (b) Insufficient in-place cash flow to service the debt on the assets as rental properties at the leverage levels achieved; (c) Limited parking at one of the properties; (d) Structuring a “wedge equity” investor to provide 90% of the developer’s $1,400,000 (2% LTC) equity contribution; and (e) including a co-developer in one of the two transactions. Terms: (1) Senior Pricing: 1-month LIBOR + 3%; Mezzanine Pricing: 10% (for a blended interest rate of roughly 8.69%); (2) LTC: 98%; (3) Term: 24 months; (4) Amort: I/O; (5) Non-recourse; (6) Lender Fee: 1%. (Gary E. Mozer, Lee Norman, Larry Wilemon).

$23,796,129 Acquisition/Bridge Financing for 140,000 Sq. Ft. Vacant Office Campus in Northern California GSP arranged non-recourse, floating rate financing for this three building property located in the Bay Area. Property was a mid 1980’s build-to-suit for a single tenant who vacated in 2005. It consists of three identical buildings on a 10 acre site, set in a campus environment including an artificial lake. The market vacancy is approximately 8% with positive absorption trends. Our borrower was able to purchase the property for below replacement value by accommodating the seller’s short time frame to waive contingencies and close. The financing is 80% of total project costs, including interest reserve, operating reserve, property renovations, and tenant improvements/leasing commissions. Lender met the acquisition schedule time frames by issuing a commitment two weeks from application and closing four weeks later. Terms: (1) Rate: 30 Day LIBOR + 2.6%; (2) Loan Term: 3 yrs; (3) Amort: Interest only; (4) LTC: 80%; (5) Lender Fee: 1%. (Steve Bram, David R. Pascale, Jr., Steve Yazdani)

SCOTT BOTTLES JOINS GEORGE SMITH PARTNERS AS PRINCIPAL

We are thrilled to announce that Scott Bottles, 22-year Wells Fargo veteran, has joined GSP as a principal. “Scott Bottles brings a wealth of institutional management experience and established relationships to the firm,” explained Gary E. Mozer, Principal/Managing Director of George Smith Partners. “Scott will be instrumental in expanding our services to our growing client base.”

Bottles held various management positions throughout his 22-year tenure at Wells Fargo bank. Most recently, he directed the bank’s real estate capital markets activity in the Southwestern region as senior managing director and principal of real estate merchant banking. During his tenure at Wells Fargo, Bottles participated in the underwriting and approval of more than $9 billion in debt.

“I look forward to being a part of one of the most influential firms in the commercial real estate market,” Bottles said. “I worked extensively with GSP in my previous position and feel as if I am already part of the family. It is my mission to help the firm expand its book of business and further solidify its position at the top of the industry.”

An award-winning author, Bottles holds a PhD in American history, as well as an MBA in finance and accounting from the University of California, Los Angeles.

Bottles has served on numerous non-profit boards. He is past president of The Accelerated School, a charter school, which was named Time Magazine’s Elementary School of the Year in 2000. He has also served on the boards of the Los Angeles Chamber Orchestra, the Historical Society of Southern California and the California Counsel for the Humanities.

INTEREST RATE/CMBS UPDATE!

The 10 Year Treasury continues to trade near 4.60% as none of the economic reports indicate any “overheating” of the economy. A consensus has emerged regarding the Fed posture: no raises in the two remaining meetings this year followed by possible rate cutting in the first quarter of 2007. LIBOR and 12-MAT rates have been stagnating for approximately two months, so all floating rate indices are stable for the time being. CMBS originators are aggressively quoting and putting transactions into application over the next few weeks for the annual year-end production push. Stay tuned… David R. Pascale, Jr.

SPEAKERS CORNER

Gary M. Tenzer, GSP Principal/Senior Director, will be giving a lecture to the Topics in Advanced Real Estate Finance class at USC on October 11, 2006. He will be discussing “The Current Real Estate Capital Markets.”