GSPartners
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Volume XV | No. 20 | June 6, 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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4.94%
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5 Yr Swaps
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5.44%
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12-MAT
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5.02%
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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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4.97%
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10 Yr Swaps
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5.55%
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11th Dist COFI
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4.22%
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6 Month LIBOR
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5.39%
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30 Yr US Treasury
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5.08%
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| | | Transaction Description: | | $17,585,000 Permanent Fixed Rate Financing, 99% of Purchase Price, for two Transitional Multifamily Properties in Los Angeles. GSP arranged long-term fixed rate financing for the acquisition of two apartment complexes with a combined 173 units in Los Angeles, CA for an experienced local apartment operator. The business plan for the properties is to perform capital upgrades (approximately $4,000 per unit) and increase rents 11%. The loans represented 99% of the purchase price, and approximately 92% of the “all-in cost”, including rehab costs, interest reserve, and all fees and closing costs. Properties are approximately 95% occupied. Because the borrower was on a short timeframe for both loans, GSP worked closely with the lender to process these loans, from application to funding, in about three weeks. |
Challenge: The borrower sought fixed rate permanent loans for transitional properties. One of the properties does not have enough cash flow to support the debt service on the requested loan amount, and the permanent loan underwrites properly only upon the borrower successfully increasing the cash flow. |
Solution: GSP was able to identify a permanent lender willing to fund loans for both properties with no holdbacks. For the property with insufficient cash flow, the lender included an interest reserve in the loan to supplement the mortgage payments until the property cash flow covers the debt service. |
| Property A
Rate: 10 Yr T + 1.85%
Term: 10 yrs
Amort: 5 yrs Interest Only, then 30 yr amort
LTV: 90% as-is, 75% stabilized
DCR: 1.10
Prepayment: Defeasance
Non-recourse
Lender Fee: 1.5%
Property B
Rate: 10 Yr T + 1.70%
Term: 10 yrs
Amort: 5 yrs Interest Only, then 30 yr amort
LTV: 95% as-is, 80% stabilized
DCR: 1.04 as-is inclusive of interest reserve, 1.10 stabilized
Prepayment: Defeasance
Non-recourse
Lender Fee: 1%
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| | | Transaction Description: | $11,721,000 (95% LTC) Financing for 69,230 Sq. Ft. Retail Center in Sacramento, California. GSP arranged $10,491,000 of senior permanent financing (85% LTC) and $1,230,000 of mezzanine financing (95% LTC) for the acquisition of a five building, 69,230 sq. ft. Big Lots anchored retail center in Sacramento, California. The property is currently 100% leased to 19 tenants, including 50.2% leased to a single tenant through January 2010.
Unique Characteristics: The same lender is providing 10 year permanent debt financing at 95% of total costs. |
| | Rate: Senior: 10 Yr T + 1.35%; Mezz: 10% cum pref return + 30% pari passu profit participation | | Term: 10 yrs | | Amort: Interest Only | | LTC: Senior: 85%; Mezz: 95% | | DCR: 1.20 actual | | Non-recourse | | Lender Fee: Senior: Par; Mezz: 1% |
Key Players: Gary E. Mozer, Steven Orchard, Joshua Roseman
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| | | | Great Program for Existing Owners or Buyers Looking to Capitalize Reposition Costs. Nationwide lender providing high leverage fixed rate bridge financing for existing properties including multifamily, office, industrial, hotels and retail. Value-add repositioning opportunities and refinancing. Financing may include funding for capital improvements or earn-outs based on performance. Lender can underwrite and close quickly. All loans serviced in-house. | | Transaction Size: $15-50M | | Rate: Fixed or floating, LIBOR or Swap + 2.0-3.5% | | Loan Term: 2-5 yrs | | Amort: Interest Only | | Max LTV: 90% | | Min DCR: Less than 1.0 with interest reserves | | Non-recourse | | Prepayment: Yield protection for minimum of 18 mos | | Fees: 0-2% | | Geography: Nationwide |
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| | | Interest Rate/CMBS Update | The 10 Year T is at 5.00% as the US economy continues to show strength during a housing slump… a situation very few predicted. The bond market gets more and more bearish with each new report (the next Fed meeting is June 27). CMBS: Originators report that the “break even” is no longer widening daily, a good sign. The secondary market for seasoned CMBS bonds is trading well, lots of demand. It seems that the recent aggressively underwritten bonds will trade “poorly” with investors demanding higher spreads. Still lots of inventory to be securitized. Stay tuned… (David R. Pascale, Jr.)
| | | Speakers Corner | Steve Bram, GSP Principal/Senior Director, will be guest speaker at a Real Estate Finance class for the Urban Land Institute’s Developer Training Program on June 9, 2007. The course, titled The Advanced Development Process: Commercial, presents a detailed look at commercial development and redevelopment, with an emphasis on office buildings. Participants will learn about successful projects that found a niche in the market, and the process their developers went through from conception to completion.
The class is June 8-11, 8:15am – 6:00 pm.
Faculty:
Mark S. Hassinger
President, WestDulles Properties
Louis H. Masotti
President, Louis H. Masotti, Ltd.
| | | 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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