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| Volume XV | No. 4 | February 15, 2007 |
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| KEY RATE INDICES |
| Prime Rate |
8.25% |
1 Month LIBOR |
5.32% |
5 Yr US Treasury |
4.72% |
5 Yr Swaps |
5.10% |
| 12-MAT |
4.98% |
3 Month LIBOR |
5.36% |
10 Yr US Treasury |
4.74% |
10 Yr Swaps |
5.20% |
| 11th District COFI |
4.40% |
6 Month LIBOR |
5.40% |
30 Yr US Treasury |
4.83% |
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| MBA: Economic Outlook Presentation by Doug Duncan, Chief Economist, Mortgage Bankers Association. |
Economic Overview:
(1) Global Demographics: India and China are emerging economic superpowers with phenomenal growth rates. They are competing for resources with other expanding countries such as Brazil. (2) US Demographics: “New Sunbelt” growth areas include Pacific Northwest, Idaho, Utah, Colorado (out west) and the Carolinas, Georgia, Tennessee. These states are experiencing high domestic migration and foreign immigration rates with lots of job creation. (3) Largest rates of migration are in “Large Suburb” and “Large Exurb” markets. (4) Aging Baby Boomers: 50% growth this decade in the 55-64 group. (5) Macroeconomic Health is good as Capital Flows, Investment, and Consumption all are in harmony at sustainable levels.
Interest Rates:
(1) Fixed Rates: Rates stay low as long as the bond buyers are buying. The index (Treasuries) is largely dependent on foreign (mainly Asian) banks buying US Debt while spreads are dependent on CMBS bond buyers. Biggest buyer of CMBS: Private Equity Funds. (2) Floating rates: Dependent on the Fed’s response to real or perceived inflation risk, LIBOR tracks Prime.
Commercial Real Estate Markets:
(1) “The Perfect Calm” -- Improving Property Markets + Capital Availability + Innovations in Capital Markets = Strong commercial mortgage markets. (2) Retail: Phenomenal growth in certain Sunbelt markets such as Phoenix, Miami, Houston, Austin. (3) Commercial sales volume hit an all time high again for 2006. Lead property types: office, followed by apartment, retail, industrial in that order. (4) Cap Rates have leveled off after years of compression; overall cap rate national average (core property types) is 6.8%. (5) Volume: 2005 and 2006 were about tied as largest volume of commercial mortgage origination, CMBS had a record year in 2006 of over $200 billion, life companies: approximately $50 billion. Commercial banks also had a big year in 2006. (6) Delinquencies were very low, sub 1.00% for all sectors with commercial banks at about 1.10% (CMBS: 0.50%). (7) What’s next? Lot’s of CMBS loans maturing in the next few years.
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| Transaction Description: |
| $26,100,000 (90% LTV, $181/Sq. Ft.) Permanent Financing for 143,450 Sq. Ft. Office Buildings in Whittier, California. GSP arranged permanent financing for the acquisition of a 143,450 sq. ft. office property located in Los Angeles County. The two-building office campus was built in 1981 and is 78% occupied. Unique Characteristics: The lender held proceeds despite a 0.03% run on US Treasuries between application and close. The lender accepted a master lease from the borrower in place of key lease renewals that were not executed pre-funding. |
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| Rate: 10 Yr T + 1.25% (6%) |
| Term: 10 yrs |
| Amort: Interest Only |
| LTV: 90% |
| DCR: 1.15 |
| Prepayment: Defeasance, with the last 6 months open |
| Lender Fee: Par |
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Recourse: Borrower is signing a $500,000 guaranty in lieu of making the TI/LC monthly deposits.
Key Players: Scott Bottles, Steve Orchard, Sean Lurry
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| Transaction Description: |
| $10,400,000 Non-Recourse Acquisition Financing at 80% of Cost (Acquisition + PIP) for Limited Service Hotel. GSP arranged long term, fixed-rate financing to acquire a flagged limited service hotel located in a secondary Indiana Market, 25 miles outside of Chicago. Since 2004, this hotel has performed at the top of the market, even though it is not in a typically A location (such as near an airport or on a major artery). |
Challenge: The hotel’s limited operating history since the property stabilized in late 2004. |
Solution: The borrower intends to improve management, operations and marketing, thus improving occupancy and net cash flow. |
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| Rate: 10 Yr T + 1.22% |
| Term: 10 yrs |
| Amort: 30 yrs |
| LTV: 80% |
| DCR: 1.50 |
| Prepayment: Yield Maintenance |
| Non-recourse |
| Lender Fee: Par |
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Key Players: David Stepanchak, Allison Higgins
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| Transaction Description: |
| $8,315,000 Permanent Financing for Hilton Garden Inn. GSP secured a permanent loan to refinance a Hilton Garden Inn in Layton, UT. The hotel was part of an agreement with the city to develop a hotel and convention center. A portion of the collateral attached and associated with the convention center is under a condominiumization with the city. The hotel benefits from the local Air Force Base and the associated business generated from the private contractors. The asset was built in 2003 by the borrower. |
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| Join Us As We Reach New Heights |
George Smith Partners is in the midst of a record-setting period of growth. As we continue to reach new heights, we are selectively seeking several seasoned & successful financial professionals to join our team. Please direct confidential inquires to Todd August, Chief Operating Officer, at (310) 557-8336, Ext. 125.
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| ©2007 George Smith Partners, Inc. FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved. |
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