GSPartners
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Volume XV | No. 34 | September 12, 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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5.80%
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5 Yr US Treasury
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4.11%
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5 Yr Swaps
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4.79%
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12-MAT
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4.93%
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3 Month LIBOR
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5.70%
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10 Yr US Treasury
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4.42%
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10 Yr Swaps
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5.07%
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11th Dist COFI
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4.28%
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6 Month LIBOR
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5.49%
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30 Yr US Treasury
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4.69%
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| | | Transaction Description: | | $57,800,000 (85% LTC, Non-Recourse) Construction Loan for 100 Unit Condominium/Town Home Development in Scottsdale, AZ. GSP secured a construction loan for the development of 68 luxury condominiums and 32 town homes adjacent to downtown Scottsdale. |
Challenge:
1. Market: Scottsdale has a number of competing projects coming on-line and is faced with a negative perception because of both the glut of single family homes in the Greater Phoenix MSA and several large condo projects in the Downtown Scottsdale area.
2. Capitalization: Borrower wanted both debt and mezzanine financing for the project to get out previously trapped equity.
3. Phasing: Borrower needed the ability to schedule construction in two phases and wanted few restraints when moving forward.
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Solution:
1. Market: Before marketing the deal, GSP performed an in-depth analysis of competing developments and positioned the project as a unique entity in an otherwise crowded arena.
2. Capitalization: The Borrower had owned the land for several years and re-zoned the property during that time. GSP argued that because of the re-zoning, substantial imputed equity was achieved. The Lender gave credit for the imputed equity in excess of a CBRE appraised value. The $57,800,000 loan amount is 95% of actual cost (excluding imputed equity) which eliminated the need for expensive mezzanine financing.
3. Phasing: The lender agreed to commence Phase I with no presales. Of the 50 units in Phase I, only 25 have to be under contract (not closed) to start the Phase II construction.
The Lender held to all their original terms in the midst of the current capital market crisis.
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| | Rate: LIBOR + 3.75% | | Term: 36 mos | | LTC: 85% (land at FMV); 95% (land at cost) | | Lender Fee: 1% in, 1% out (through sales) | Pre Sales: None Required
Recourse: Completion Guarantee only
Key Players:
Steve Bram, Jonathan Lee |
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| | | | High Asset Portfolio Lender Acting as “Large Community Bank” Offers Competitive Rates on Small to Medium Construction Loans. High leverage. Loans for properties nationwide, but borrowers must be in Western US. Commercial and residential properties (including multifamily, condos, SFR, etc.). | | Transaction Size: $5-35M (above $35M will be participated out) | | Rate: LIBOR or Prime based, spreads 150-250 | | Loan Term: 12-36 mos | | Max LTC: 90% | | Fees: 0.50-1.0% | Generally Recourse (Partial Recourse available) |
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| | | Market Watch | Treasuries: Yields plunged last week (10 Year reached 4.29%) as the employment report indicated subprime woes are affecting the “macro” economy. The market is convinced the Fed will lower the Fed Funds rate on September 18. The question is how much – 0.25% or 0.50%? This week’s economic reports will be closely watched. CMBS: The 10 Year Swap narrowed from 74 to about 65 (9/11/07). Overall spreads are approximately T + 170-190 with huge volatility. The latest concern among the Investment Banks is huge amounts of their own commercial paper are coming due this month. The usual buyers may be on the sidelines or demanding high spreads because they are unsure about levels of subprime exposure among the issuers. A liquidity crunch among the originators will affect loan pricing and volume throughout the fixed rate markets. Stay tuned… (David R Pascale, Jr.)
| | | In the Press | | | | 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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