Interest Rate Swap for a $25,000,000 Construction Loan

TRANSACTION OF THE WEEK!

Interest Rate Swap for a $25,000,000 Construction Loan on Behalf of a Midwest Bank. GSP structured a swap on a 30 month floating rate construction loan priced at 30 Day LIBOR + 2%. The swap will give the borrower a fixed rate which is LOWER THAN the initial LIBOR based rate for the term of the loan.

GSP offered two alternative rate management structures, neither of which requires the payment of a fee or the posting of collateral:

1.  Swap the loan, resulting in a fixed rate to the borrower of 7.20%, which is 0.12% lower than the LIBOR starting rate of 7.32%.

2.  Collar the loan with a cap of 7.65%, a floor of 7.0%, and a starting rate of 7.32%.

Option (1) was selected as it offers a lower start rate, avoids any rate increases, and is only 0.20% higher than the floor in option (2). GSP maintains correspondent relationships with two major investment banks to provide our clients with the full spectrum of interest rate protection strategies and superior execution. (Gary M. Tenzer, Nathan Auslander)

$24,000,000 ($178/Sq. Ft.) Bridge Financing for 134,866 Sq. Ft. Seven Building Office/R&D Park in Mountain View, CA. GSP arranged bridge financing (81% LTV) for the acquisition of a 134,866 sq. ft. office/R&D park located in Mountain View, California. The property is 88% leased to eight tenants. Unique Characteristics: Actual rents are currently 45% over-market. The loan includes minimal covenants for extension and minimal leasing reserves. Terms: (1) Rate: 1 Mo LIBOR + 1.75%; (2) Term: 36 mos + two 12 mo extensions; (3) Amort: I/O; (3) LTV: 82%; (4) Non-recourse with carve-outs to an entity; (5) Loan Fee: 0.75%; (6) Actual DCR: 1.34; Marked-to-Market DCR: 0.80. (Gary E. Mozer, Lee Norman, Steven Orchard, Joshua Roseman)

$9,220,000 Permanent Financing for an Unanchored Retail Center in Great Neck, NY. GSP secured a permanent loan to refinance a 35,655 Sq. Ft. neighborhood shopping center located in Great Neck, New York. The 100% occupied, seven tenant retail center was built in the 1940s and rehabbed in 1986. Challenges included getting the lender comfortable with owner-management of the center. Terms: (1) Rate: 10 Yr T + 1.06%; (2) Term: 10 yrs; (3) LTV: 73%; (4) DCR: 1.07 (in place) / 1.20 (stabilized); (5) Amort: First 5 yrs I/O, then 30 yr amortization; (6) Non-Recourse; (7) Lender Fee: Par; (8) Reserves: Structural and leasing reserves waived in lieu of personal guarantee. (Farzin Emrani, Steve Bram)

INTEREST RATE/CMBS UPDATE!

Interest Rate Update: Bond market closed early today, but not before a slight rally pushed the 10 Year T down to 4.56%. The 10 Year Swap tightened to below 50. Full leverage CMBS transactions are pricing in the 5.50-5.75% range, many with interest only for some or all of the loan term. Stay tuned... (David R. Pascale, Jr.)

GSP PROFILES
(Part of our continuing series profiling GSP's "Next Generation" of Brokers)

Nathan Auslander, Vice President: Mr. Auslander joined George Smith Partners in early 2006. He previously owned and managed a successful mortgage-banking firm that specialized in high leverage financing for residential builders. At George Smith Partners, he directs the firm’s Interest Rate Protection Program. Mr. Auslander holds a Bachelor of Arts degree from Columbia University and a PhD from the University of Colorado, Boulder.

Bret Victor, Associate: Mr. Victor joined George Smith Partners in 2006. Previously, he was a loan originator and hard-money lender at Western Highland Mortgage. He also served as a loan officer at Americawide Mortgage. Mr. Victor earned his Bachelor of Science degree in Political Science from the University of Arizona in 2001.