GSPartners
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Volume XV | No. 14 | April 25, 2007
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KEY RATE INDICES
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Prime Rate
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8.25%
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1 Month LIBOR
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5.32%
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5 Yr US Treasury
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4.52%
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5 Yr Swaps
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4.99%
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12-MAT
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5.03%
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3 Month LIBOR
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5.36%
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10 Yr US Treasury
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4.64%
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10 Yr Swaps
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5.16%
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11th Dist COFI
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4.38%
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6 Month LIBOR
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5.35%
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30 Yr US Treasury
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4.82%
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| | | Transaction Description: | | $9,250,000 Fixed-Rate, Non-Recourse Acquisition Financing for a Single-Tenant Credit Office Building in Irwindale, CA. The two story, 56,510 sq. ft. property was built in 1993. |
Challenge: 1. The Borrower required the lender to close within 25 days to qualify for a 1031 exchange. 2. The tenant’s lease had four years remaining term with a short notice period for renewal. 3. Due to high security requirements imposed by the tenant, property inspections by third parties were virtually impossible. |
Solution: 1. Numerous face to face meetings with senior lender’s senior management enabled a number of processes to be expedited and certain loan conditions relaxed. 2. GSP structured the loan to provide buyer with a minimum acceptable annual cash flow while satisfying lender’s need for rollover reserves. 3. Persistence. |
| | Rate: 5 Yr T + 1.28 | | Term: 5 yrs | | Amort: Interest Only | | LTV: 75% | | DCR: 1.15 | | Prepayment: Defeasance | | Non-recourse | | Lender Fee: Par |
Key Players:
Gary M. Tenzer , Bryan Berkett |
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| | | Transaction Description: | | $5,500,000 Mezzanine Financing for 230,000 Sq. Ft. Office Complex in Silicon Valley. GSP arranged 80% of total project cost non-recourse senior debt for the acquisition and reposition of this property in January 2007. The senior/mezz loan total provides 89% leverage. This financing is fixed rate, non-participating. Property specs: three early 1980’s buildings (large building is 130,000 sq. ft. plus 2 x 50,000 sq. ft.), two stories each, 70% occupied, 9.5 acre site, campus feel, well-landscaped, great visibility. Reposition: new exterior façade, improved main lobbies and renovation of all empty spaces to “market ready” condition. |
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| | | Hot Money | National Lender Offering Special Mezzanine Program that Allows Borrowers to Take Out Additional Funds during the Course of the Loan Term as the Property Value Increases. As the value appreciates, this lender will update the appraisal. The borrower can then get more proceeds based on the higher value without the LTV increasing. Details are written in loan documents at time of acquisition or refinance.
Property Types: Office, medical office, retail, industrial, apts, senior apts, affordable/military/workforce housing.
| | HIGHLIGHTS | | Transaction Size: $2-20 M | | Rate: Deal specific | | Loan Term: Fixed: 5-10 yrs; Floating: 2-3 yrs with extension options | | Amort: Up to 5 yrs I/O, then some amortization after yr 5 | | Max LTV: 90% | | Max LTC: 90% | | Min DCR: As low as 1.05 actual at closing (lower DCR considered with credit enhancement or near-term upside). | | Non-recourse | | Prepayment: Consistent with senior loan | | Fees: 1% | | Geography: Nationwide |
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| | | Interest Rate/CMBS Update | The biggest drop in single family home sales in 18 years rallied the bond market today; the 10 year T dropped to 4.61% with similar drops throughout the curve. CMBS: The subprime market fallout is rippling across the commercial sector: (1) B piece buyers liquidity crunch: as the Collateralized Debt Obligation (CDO) spreads widen (these instruments often contain commercial B pieces and subprime residential), the B piece buyers are less liquid and demanding better pool collateral, hence more “kickouts”; (2) Rating agencies tighten subordination standards as underwriting standards have loosened since September (ie: interest only, lower DCR requirements, etc): Fitch and Moody’s actions are creating smaller AAA tranches, which means larger unrated and B pieces, further stressing the B piece buyers; (3) Hedge funds: firms looking to make quick profits by “flipping” AA and AAA bonds are moving to the sidelines, leaving less liquidity at the high end. What does it all mean? Wall Street abhors uncertainty so look for originators to originators a searching for equilibrium, Stay tuned... and is tightening underwriting adn ements, etc)rcial B pieces and stotighten underwriting and widen spreads as they search for equilibrium. Stay tuned… (David R. Pascale, Jr.) | | | Speakers Corner | May 1, 2007
Gary M. Tenzer, GSP Principal/Senior Director, will moderate a panel discussion entitled “New Kids on the Block: An Introduction to New Capital Sources” at the West Coast Structured Finance Conference onTuesday, May 1, 2007. The event is sponsored by the Los Angeles Mortgage Association (LAMA) and will be at the Skirball Cultural Center, Los Angeles, CA. Panelists include:
· Joan Kramer, Managing Director, Marathon Asset Management
· Jay Rollins, President & CEO, JCR Capital
· Douglas Vikser, President, Coress Capital
· John C. Bauer, Senior Director, Tremont Realty Capital
May 17, 2007
Steve Bram, GSP Principal and Senior Director, will participate in a panel discussion on “The Apartment Market in 2007: Can a good thing last forever?” at the 2007 San Fernando Valley Economic Summit. Other panelists include:
· Steve Heimler, President and CEO, Stratus Real Estate
· John Walsh, Vice President/Investments, Marcus & Milichap
· Rick Entin, Principal, Entin Properties (moderating)
The panel will explore current market conditions and the near and long term outlook for the multi-family sector in the Greater San Fernando Valley. Panel experts will discuss topics including investment sales activity, management issues, development and conversion activity, and the related debt and equity markets.
The conference is on Thursday May 17th 7:30 am – 1:30 pm at the Sheraton Universal Hotel.
| | | 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 inquiries 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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