GSPartners
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Volume XV | No. 31 | August 29, 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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5.51%
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5 Yr US Treasury
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4.24%
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5 Yr Swaps
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4.96%
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12-MAT
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4.98%
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3 Month LIBOR
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5.51%
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10 Yr US Treasury
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4.52%
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10 Yr Swaps
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5.24%
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11th Dist COFI
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4.28%
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6 Month LIBOR
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5.43%
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30 Yr US Treasury
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4.85%
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| | | Transaction Description: | | $9,650,000 Forward Commitment Financing for 33,000 Sq. Ft. Class A Medical Office Building in Northern Los Angeles County. GSP arranged an $8,000,000 construction loan for this property in late 2004. We also arranged and rate locked the 24 month forward commitment in 2005. Property is two stories, 100% occupied. Our borrower is a group of doctors who had never built a building before. All the doctor/borrowers occupy spaces in the building. |
Challenge: Due to title and legal issues, both the loan commitment and rate lock expired before funding. Now in the midst of the recent capital markets turmoil, the loan was priced substantially below the current break-even and lender invoked the “material adverse change” clause. |
Solution: However, lender only increased the spread by 30 basis points (to their breakeven) and aggressively re-underwrote to preserve loan proceeds and all other loan terms. |
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| | | | Attention Small Apartment Owners! Small multifamily loan program underwriting to a 1.05 DCR. Available for refinance or acquisition loans. “Free” 30 day rate lock; longer rate lock available. This program is ideal for low cap rate acquisitions. | | Transaction Size: $400K - $2.4M | | Rate: 10 Yr T + 1.80-2.00% | | Loan Term: 10 yrs | | Amort: 30 yrs | | Max LTV: 80% | | Min DCR: 1.05 | | Recourse | | Property Types: Multifamily | | Prepayment: YM | | Fees: Par | | Geography: Nationwide |
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| | | Market Update | The overall credit market has been slightly soothed by recent actions by the Fed: (1) Lowering the discount rate; (2) Urging four money center banks to borrow $500,000,000 each at the lower rate to increase liquidity in the market. Several times we have used the phrase in this column “all eyes on the Fed;” that has never been more true regarding the September 18 Fed meeting. The consensus among the investment banks and bond market is that a 0.75% cut in the Fed funds rate by year end has been “priced in” to the market. There has been no cutting since the Fed started raising rates in June 2004. If the Fed keeps the rate steady (because of hawkishness on inflation), the market may panic due to a perceived lack of liquidity. CMBS: Some tightening at the end of last week and this week in the AAA class. Some originators indicated that break even is approximately 10 bps tighter. Unfortunately, today Swaps widened approximately 10 bps due to economic reports (consumer confidence and housing prices). These bearish reports put more pressure on the Fed to lower the Fed funds rate. Also, the CMBS market is looking forward to next week as the “A team” (decision makers at the major funds and investment banks) return from vacation. 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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