Rate Update: Yield Curve Inversion - FINfacts

KEY RATE INDICES

FANNIE MAE RATES *

Prime Rate	7.50%
3 Mo. T’s (YTM)	4.59%
6 Mo. T’s (YTM)	4.73%

5 Yr. U.S. T’s	4.63%
10 Yr. US T’s	4.56%
30 Yr. US T’s	4.51%
12-MAT	3.75%

LIBOR - 1 mo.	4.58%
LIBOR - 3 mo.	4.81%
LIBOR - 6 mo.	4.96%
LIBOR - 1 yr.	5.12%

Tier 2++ (80% LTV)	5.81%
Tier 3++ (65% LTV)	5.67%
Tier 4++ (55% LTV)	5.53%
10 yr. term/30 yr. amort.

TRANSACTION OF THE WEEK!

$12,920,000 (90% LTC) Non-Recourse Repositioning Loan for a Vacant Mixed-Use Office and Retail Property. GSP arranged a $12,920,000 repositioning loan for an 89,000 s.f. vacant mixed-use office and retail property located on Van Nuys Blvd in Panorama City. The Property sits on approximately 1.49 acres and is improved with a six-story office building, two-story concrete parking structure (approx. 300 spaces) and associated landscaping. It was developed in 1981 and is located in a prime in-fill location in a very busy intersection surrounded by retail centers and situated across the street from Wal-Mart. Terms: (1) Pricing: 30 day Libor + 3.50%; (2) Loan Term: 4 yrs; (3) Non-recourse; (4) LTC: 90%; (5) Lender Fee: par; (6) Exit Fee: 2% if loan is paid within 24 months, 2.5% if loan is paid within 30 months, 3% if loan is paid within 36 months or more; (7) Prepayment: Not allowed first 24 months. (Andrew Levant, Gilda Rivera)

$9,910,000 Non-Recourse Bridge Loan (82.50% LTC) at LIBOR+2.35% on a 65,325 S.F. Retail Center. GSP has arranged non-recourse bridge financing to facilitate the acquisition & reposition of a 65,325 s.f. “big-box” anchored (shadow-anchored by grocer) retail center on a major thoroughfare in Upland, California. Challenges to the deal included underwriting income on an unentitled to-be-developed pad site, a minor contamination issue, and a long-term anchor tenant lease at vastly below market rents Terms: (1) Rate: 30 Day LIBOR (swapped for a 3 yr fixed-rate at 5.03%) + 2.35%; (2) Loan Term: 36 months + two 12-month extensions; (3) LTC: 82.5%; (4) LTV: 85%; (5) Fees: 0.8% Lender Origination Fee; (6) Prepayment: Locked-out for 12 months, then open. (Gary E. Mozer, Lee T. Norman,Steven C. Orchard, Gil Barkon)

$5,500,000 (80% LTV) Permanent Loan for 25,000 S.F. Retail Center. GSP arranged $5,500,000 of permanent financing for a 25,000 s.f., seven tenant, 100% occupied, shadow-anchored (by grocer) retail center in Southern California. The loan included a significant developer cash-out. Terms: (1) Rate: 10 Yr T + 1.15%; (2) Loan Term: 10 yrs; (3) Amort: 30 yrs; (4) Non-recourse; (5) Prepayment: Defeasance; (6) Lender Fee: Par. (Larry Wilemon , Gil Barkon)

$1,700,000 (5-Year Fixed) 65% Acquisition Financing for Retail Center in Florence, SC. GSP placed a permanent loan on a grocery-anchored retail center in Florence, South Carolina. While almost all of the tenants have been in the center since the early 1990’s, there is considerable lease expiration within the loan term. The anchor tenant, Food Lion, has been in the center since 1979. GSP’s challenge was to get lenders comfortable with the lease expiration in five years and the satisfactory, but not exceptional, sales per s.f. GSP was able to secure 5-yr, fixed rate financing from a portfolio lender located in Florence who was familiar with this asset and comfortable with the lease turnover risk despite the stated hurdles. Terms: (1) Pricing: 7.08%; (2) Term/Amort: 5/25; (3) LTV: 65%; (4) DCR: 1.35x; (5) Full Recourse; (6) Lender Fee: 1%;
(7) Pre-payment: Yield Maintenance. (Allison Higgins , David Stepanchak )

HOT MONEY

West Coast Opportunity Fund Offering Quick Closes/High Leverage on a Variety of Loan Types. This lender will consider raw land acquisition, bridge financing, and construction and will close quickly to accommodate acquisition timetables. Program Highlights: (1) Loan Size: $3,000,000-$75,000,000; (2) Geographic: Western States, “Within a two hour plane ride of Southern California”; (3) Raw Land (Unentitled): a. Max LTV: 50% (“as-is”), b. Typical Loan Term: 1 yr with 4 x 3 month options; (4) Entitled Land: a. Max LTV: 65%, b. Typical Loan Term: 1 yr with 4 x 3 month options; (5) Property Acquisition/Development Funding (preliminary entitlements have been approved): Max LTV up to 75% of future value, 5% minimum equity contribution; (6) Bridge Funding: a. Max LTV up to 80% of “as is” for initial disbursements, earn outs will be considered based upon property performance; b. Typical loan term 1 yr with 4 x 3 month options; (7) Mezzanine Financing: Mezz Financing will be considered to raise leverage on most of the above mentioned loan programs; (8) Rates and Loan Fees are deal specific.

Rate Update: Yield Curve Inversion

Well, the recent 30 year Treasury Auction proved very popular, driving the yield down below the 10 year. The 2 year and 5 year yields are higher than the long end, inverting the curve downward from 2 to 30 year Treasuries. Loan Terms: In 2004 and most of 2005, many borrowers took advantage of a 5 year T yielding 85-100 basis points lower than the 10 year T. Lenders typically charge approximately 20 basis points as a premium in spread for a 5 year term, so short term borrowers were benefiting with substantially lower all in rates of 65-80 bps below the 10 year. Today, a typical 5 year CMBS transaction will price about 35 bps above a 10 year transaction. Why the inversion? The "standard line" is that it's a harbinger of a recession, but this time it may be just pent-up demand for longer term paper, combined with the Fed arbitrarily raising the short term. Stay tuned... (David R. Pascale Jr. )

Congratulations to Lee Norman!

Lee Norman was selected by Real Estate Southern California to be featured in the "40 Under 40" cover story for the second year in a row! Look for the article in the March issue.

Press Box

GSP Principal and Executive Vice President Gary M. Tenzer was interviewed by Apartment Finance Today regarding the refinancing of a $65,600,000 student housing portfolio that GSP arranged, as well as the complexities of financing student housing in general.