GSPartners
|
|
|
Volume XV | No. 7 | March 7, 2007
|
|
|
|
KEY RATE INDICES
|
|
Prime Rate
|
8.25%
|
1 Month LIBOR
|
5.32%
|
5 Yr US Treasury
|
4.47%
|
5 Yr Swaps
|
4.93%
|
|
12-MAT
|
5.01%
|
3 Month LIBOR
|
5.34%
|
10 Yr US Treasury
|
4.52%
|
10 Yr Swaps
|
5.06%
|
|
11th Dist COFI
|
4.39%
|
6 Month LIBOR
|
5.30%
|
30 Yr US Treasury
|
4.66%
|
|
|
|
| | | | | | Transaction Description: | | $57,250,000 (95% of Cost) Non-Recourse Construction/Bridge Financing for a 480,000 Sq. Ft. Industrial Condo Conversion in San Fernando Valley. GSP arranged high-leverage construction financing for a vacant 400,000 sq. ft. industrial building on 22 acres. The property was originally constructed in the 1950’s and was previously occupied by two different owner/users until being sold in late 2006. The business plan is to parcelize the property, subdivide the existing building into a multi-tenant space and add approximately 130,000 sq. ft. of new construction on the excess land which will be sold to one or more buyers. Shortly after closing on the property with an interim acquisition loan, the borrowers signed a long term net lease to a national credit tenant for 120,000 sq. ft. and also entered into a purchase contract to sell 100,000 sq. ft. to an owner/user. The new construction loan provides funds to renovate the balance of the existing space, construct the new space, and provided the return of a significant amount of the borrower’s initial equity contribution by virtue of the new lease and sale contracts. |
| | Rate: LIBOR + 300 | | Term: 2 yrs. + 2 six month extension options | | Amort: Interest Only | | LTC: 95% | | Prepayment: Partial Release provisions with no minimum yield or exit fees | | Non-recourse | | Lender Fee: 1.5% |
Key Players: Andrew Levant, Gilda Rivera
|
|
|
| | | Transaction Description: | | $51,000,000 Construction Loan (90% LTC) for Mixed Use Retail/Multifamily Project. GSP arranged construction financing for the development of a 280 unit apartment building and 40,000 sq. ft. of speculative retail space in Palm Desert, CA. The property was extremely well located with great frontage on a primary thoroughfare into the City of Palm Desert. Additionally, the project had previously been part of a moratorium which had been lifted 18 months before closing the subject loan. Therefore, the immediate area is experiencing substantial development and the subject is the only multifamily "for rent" project in the immediate neighborhood. Given the location and basis in the land, GSP was able to structure a high leverage single note construction loan as well as provide the borrower with imputed equity for achieving the entitlements for the development. |
| | Rate: LIBOR + 1.85% | | Term: 36 months | | Amort: Interest Only | | LTC: 93.5% Actual, 85% with imputed equity | | Prepayment: Open | | Recourse | | Lender Fee: 0.65% |
Key Players: Noah Hahn, Steve Bram, David Pascale |
|
|
| | | Hot Money | | National Lender Providing High-Leverage Mezzanine Financing at Non-Participating Debt Rates for Construction, Value-Add Acquisitions, Rehab and Recapitalization of Multifamily Residential Assets. Mezzanine debt secured by borrower equity interests in conjunction with a new or existing third-party senior lender. Can do preferred equity (structured as mezz), bridge mezz, and construction mezz. | | HIGHLIGHTS | | Transaction Size: $4,000,000-$100,000,000 | | Rate: LIBOR based | | Loan Term: 2-5 yrs (up to 3 yrs fixed rate) | | Max LTV: 95% | | Max LTC: 100% | | Non-recourse | | Property Types: Multifamily and mixed use | | Prepayment: Open | | Fees: 2% in, 0 out | | Geography: Nationwide |
|
| | | Market Volatility Hits CMBS Markets | What Happened? As worldwide equity markets “crashed” last week, bonds rallied on a flight to quality and yields dropped dramatically. However, spreads widened as Swaps and CMBS spreads gapped out. Swaps widened .05%-.08%, AAA bonds widened .03%, BBB bonds widened .26%. Note that 75% of a CMBS pool is priced over Swaps. Also, CMBS spreads affect non-CMBS fixed rates. For example, life companies buy the bonds and originate loans.
Why did spreads widen? Wall Street loves certainty. As markets move, perceived credit risk rises and investors demand to be paid to take risk of any kind. These pricing changes occur even though overall real estate fundamentals did not change. Also, “subprime” lenders (those making high risk residential loans to homeowners) experienced major issues such as plummeting stock prices and their credit lines at risk. Time will tell how this will affect commercial lending. This may be a long overdue “correction”. After a long period of overall narrowing of credit spreads, we are now back to September 2006 levels. There was a feeling that riskier debt (“junk” corporate bonds, subprime, etc.) was “underpriced” and is now more correctly priced.
How did lenders react? Some held spreads on existing quotes, but indicated that applications must be signed or the spread would rise. Some lenders allowed rate locks at the existing spread, some allowed rate locks but raised spread, some said “no rate locks now, too volatile,” some stopped quoting. Overall, new transactions are being quoted .05%-.10% wider than two weeks ago, but keep in mind that the drop in Treasuries insulated much of that increase and loan rates have stayed relatively constant. Many borrowers are executing commitments and rate locks.
At GSP, we know which lenders have been naughty or nice and are sharing information amongst our staff so that we can continue to get our borrowers the best possible and predictable execution. In addition we have been working with borrowers on hedging and swap strategies as an alternative to forward rate locks to help buffer some of the rate risk. Stay tuned…… (Gary M. Tenzer, David R. Pascale, Jr.) | | | Speakers Corner | Gary M. Tenzer, GSP Principal and Senior Director, will participate as a panelist in the How High is the Sky? conference on March 14, 2007. The event is hosted by the Century City Chamber of Commerce Law & Business and Real Estate Councils. Topics covered include:
· Westside commercial leasing supply and demand
· Landlord-tenant relations / property management dynamics
· Investment and development outlook
· Financing sources and strategies
In addition to Gary Tenzer, panelists include:
· Eric Samek, Broadreach Capital Partners
· Richard Knight, Wachovia Bank
· William Bernfeld, Esq., K&L Gates LLP, moderating
The event will be at the Hyatt Regency Century Plaza Hotel at 8am-11:30am. For more information, click here. | | | | | | 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 and successful financial professionals to join our team. Please direct confidential inquires to Todd August, Chief Operating Officer, at (310) 557-8336, Ext. 125.
|
|
|
©2007 George Smith Partners, Inc. FINfacts is an ePublication of
George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
|
|
|
|
|
|
|
|
