GSPartners
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Volume XVI | No. 4 | January 31, 2008
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KEY RATE INDICES
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Prime Rate
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6.0%
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1 Month LIBOR
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3.26%
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5 Yr US Treasury
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2.79%
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5 Yr Swaps
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3.51%
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12-MAT
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4.52%
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3 Month LIBOR
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3.24%
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10 Yr US Treasury
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3.62%
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10 Yr Swaps
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4.24%
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11th Dist COFI
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4.17%
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6 Month LIBOR
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3.19%
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30 Yr US Treasury
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4.34%
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| | | Transaction Description: | | $17,250,000 (69% LTV, Non-Recourse) Permanent Loan for the Acquisition of an Apartment Complex in Atlanta, GA. GSP secured permanent financing for an experienced property manager for the acquisition of a 440-unit apartment complex totaling 406,784 sq. ft. in Atlanta, GA. |
Challenge: Post-close, the sponsor will syndicate the equity in the transaction to up to 35 tenants in common (“TICs”). This structure is exceedingly difficult to finance in the current market, and only a few CMBS lenders are willing to consider financing debt for TIC syndications. Additionally, the borrower’s business plan required five years of interest only payments and includes an approximate $3,100,000 capital expenditure budget to improve the property and increase rents, which added additional structure and complexity to the transaction. |
Solution: GSP identified a group of key lenders willing to lend to TIC syndications. These lenders were comfortable with the sponsor, a very experienced TIC sydicator. GSP also worked closely with the lender and the borrower to guide the transaction through a tumultuous market and ended up with terms satisfying both parties. Specifically, a structure was devised to maintain the five years of interest only payments and to release capital expenditure proceeds in a manner allowing the borrower to seamlessly perform their renovations to the property. |
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| | | | National Lender Offering 80% Leverage, Low Fees, Early Rate Lock and 30 Year Amortization. Small loans for stabilized commercial and multifamily properties. Flat fee of $6,000 covers all third party reports, legal, and lender expenses. Step down prepayment. Flexible ownership structures permitted (single asset entities not required). Capital reserves are not collected. Tenant improvement and leasing commission reserves are not collected. Tertiary markets permitted. | | Transaction Size: $1-8M | | Rate: Fixed rate 7.0-7.5% | | Loan Term: 5, 10 yrs | | Amort: 30 yr | | Max LTV: 80% | | Min DCR: 1.20 | | Recourse | | Geography: Nationwide |
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| | | Interest Rate/CMBS Update | As we go to press, the Fed has just cut the discount rate by another 0.50%. The Fed continues aggressive rate cuts as economic reports indicate a slowing economy. The move has actually contributed to a rise in Treasury yields as funds left the “safe haven” of bonds and moved into equities. The 10 Year is at 3.74% as of Wednesday afternoon. LIBOR continues to drop: 30 Day LIBOR is at 3.26%, down from 4.60% one month ago. Short term rates such as LIBOR more accurately “mimic” Fed moves. Credit Spreads (Fixed Rate): Not a single CMBS pool went to market this month for the first time since the market became a force in 1995 after the RTC crisis. The MBIA and AMBAC downgrades and losses are yet another reason for bond buyers to sit on the sidelines. (MBIA and AMBAC are the leading bond insurance companies. They are facing heavy losses due to subprime and CDO issues). Fixed rate portfolio lenders (banks, credit companies, etc) are rolling out programs; spreads are anywhere from T + 210-350 depending on asset quality, leverage, recourse level, etc. We are showcasing these programs in our Hot Money section today and in future issues. Stay tuned… (David R. Pascale, Jr.)
| | | Best of the Best | We are proud to announce the George Smith Partners was ranked number 18 nationally among mortgage banks and brokerage firms in the Commercial Property News 2008 Yearbook, Best of the Best report. Thank you to all of our friends and clients for the business you have brought us and to the lenders and capital sources who have worked with us to finance their projects. We couldn’t do what we do without you all.
| | | Join Us As We Reach New Heights | At George Smith Partners, we are looking to expand our team of top-notch mortgage brokers – originators and assistants. We offer highly competitive compensation and an excellent environment in which to work, learn and be supported. GSP is committed to providing our employees with cutting edge market information, resources for identifying the best capital sources for each transaction, training opportunities and peer support whenever it is needed.
We invite you to consider a career with George Smith Partners. Please direct confidential inquiries to Todd August, Chief Operating Officer, at (310) 557-8336, Ext. 125.
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©2008 George Smith Partners, Inc. FINfacts is an ePublication of
George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
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