GSPartners
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Volume XV | No. 30 | August 22, 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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5.50%
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5 Yr US Treasury
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4.32%
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5 Yr Swaps
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5.06%
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12-MAT
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4.98%
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3 Month LIBOR
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5.49%
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10 Yr US Treasury
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4.62%
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10 Yr Swaps
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5.33%
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11th Dist COFI
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4.28%
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6 Month LIBOR
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5.32%
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30 Yr US Treasury
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4.95%
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| | | Transaction Description: | | $4,705,000 Permanent Financing for a Single Tenant Big Box Retail Leased to CompUSA in Denver, CO. |
Challenge: 1) The tenant is a non investment grade chain with weak financials and is in the process of closing stores
2) The lease expires in October 2008 and it is unclear whether the tenant would exercise its extension options.
3) To capitalize on the then favorable low-rate environment and aggressive underwriting standards, GSP structured a long term, fixed rate transaction. |
Solution: 1) Pointing out that the lease is at a below market rental rate, GSP focused the lender’s attention on the strength of the market and the sponsor. The sponsor has extensive retail experience and owns several adjacent retail properties.
2) The borrower posted a letter of credit to in lieu of replacement, leasing, and debt service reserves.
The borrower signed the application in April and executed a rate lock agreement in July, after the expiration of the application. During this period, the 10 Yr Treasury yield increased by approximately 50 bps, swaps went up over 20 bps, and lenders have significantly tightened their underwriting standards due to the turmoil in the market.
The lender kept all its promises and funded the loan with minimal changes to the terms provided in the expired application. |
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| | | Senior Lender Ideal for Transactions that are on the Smaller Side, Have a Story, or do not Fit the Requirements of the Conduits, Life Companies or Larger Banks. Multifamily and Commercial Programs. Commercial niche includes owner occupied, single tenant, office, industrial and retail condos, medical office, among general property types. Will lend in secondary and tertiary markets and on properties with high dollar values psf as well as older properties. Lease rollover risk, cash out available, ground leases, minimal deposits and processing fees.
Transaction Size: Commercial: $1-10M; Multifamily: $1-25M
Property Types: “A” to “C” quality multifamily and commercial properties
| | Rate: 6 Mo LIBOR + 2.5-3.0 | | Loan Term: Comm: 25-30 yrs; Multifamily: 30 yrs | | Amort: Comm: 25-30 yrs; Multifamily: 30 yrs | | Max LTV: Comm: 75%; Multifamily: 80% | | Min DCR: Comm: 1.25; Multifamily: 1.15 | | Prepayment: Flexible | | Fees: Par | | Geography: Western US | Recourse: Generally, limited available and may be waived on LTVs below 65%
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| | | Market Update | Fed to the rescue? Last Friday’s move by the Fed to slash the discount window rate added liquidity and eased market fears. Yesterday’s meeting between Senator Dodd, Secretary Paulsen and the Fed also helped. Today we see major money center banks injecting even more liquidity into the market via Fed borrowing. Usually that is seen as a sign of weakness by the banks, but this time it was a reassuring signal. The corporate debt market showed a slight comeback as some new merger and acquisition activity surfaced (Dubai World and MGM, etc). However, mortgage markets are not yet nearly out of the woods. The only “good” news in CMBS is that pricing hasn’t moved in the last few days. Most new transactions are being priced in the T + 200-210 range. There are still “virtually no bids” below AA on the securitization side. One major originator’s head of real estate remarked on a conference call: “CMBS is a screaming deal at present levels, but buyers are still wary that the price will drop next week.” Look for bidding to be slow until at least mid-September, but note that when bidding starts again, there is a huge overhang of unsold bonds that will take months to clear. Stay tuned… (David R. Pascale, Jr.)
| | | 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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