GSPartners
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Volume XVI | No. 14 | May 1, 2008
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KEY RATE INDICES
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Prime Rate
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5.00%
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1 Month LIBOR
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2.80%
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5 Yr US Treasury
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3.00%
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5 Yr Swaps
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3.76%
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12-MAT
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3.79%
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3 Month LIBOR
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2.85%
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10 Yr US Treasury
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3.71%
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10 Yr Swaps
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4.32%
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11th Dist COFI
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3.56%
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6 Month LIBOR
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2.96%
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30 Yr US Treasury
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4.46%
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| | | Transaction Description: | | $15,400,000 Floating Rate Acquisition Financing for an 18 Acre Vacant Industrial Land Parcel for an Agency of the City of Los Angeles. The subject property is 787,732 net square feet (approximately 18 acres) of vacant land, zoned industrial, located in Downtown Los Angeles. |
Challenge:
1. Subject Property had extensive deep soil contamination which is in the final stages of clean up.
2. Borrower went into application in May of 2007 before the “Credit Crunch” but was not able to close until April 2008. Many lenders exited the market or became more conservative during this time and the lender wanted to change the transaction terms.
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Solution:
1. For the contamination issues, lender got comfortable with the completed reports, the holdbacks for the yet-to-be-completed clean up and the indemnification from a credit-worthy guarantor. The project was considered a “case study” under the Federal Brownfield Showcase and was a priority under Mayor Richard Riordan’s Genesis Los Angeles Initiative.
2. Lender wanted to make major changes to the loan terms as the financing markets changed, but ultimately returned to almost the original loan terms due to the strong sponsorship and the lender’s relationship with GSP.
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| | Rate: 1 Mo LIBOR + 2.5%, no floor | | Term: 3 yrs + extensions | | Amort: I/O | | LTV: 38% | | Recourse | | Lender Fee: 0.50% | Interest Reserve: Full term and structured into the loan
Key Player: Steve Bram, Bret Victor |
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| | | | National Bank Funding Large ($20,000,000+) Low-Leverage Non-Recourse Loans. Senior financing up to 60-65% loan to cost or loan to value. Office, anchored retail and multifamily. | | Transaction Size: $25M+ | | Rate: fixed Swap +250-300; floating L+250-300 | | Loan Term: up to 5 yrs | | Amort: I/O | | Max LTV: 60-65% | | Min DCR: 1.25 | | Non-recourse | | Prepayment: open | | Fees: 1-1.25% | | Geography: Nationwide |
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| | | Interest Rate/CMBS Update | Is the Fed “done?” The Fed’s 0.25% rate cut today was widely expected. The market’s curiosity was focused on the accompanying statement and any dissent among the governors. The statement seemed to suggest a pause in cuts is ahead, giving time for the stimulus package to take effect. Inflation concerns caused two of the governors to dissent (voting to keep the rate unchanged). The 10 Year T rallied, closing at 3.73%., Much of this may have been due to some selling in the stock market following the Fed announcement (investors were disappointed by the “pause” indication). The Treasury is adding another “peg” in the yield curve with the introduction of a 1 Year Treasury Bill. They are trying to increase liquidity in the market as the US budget deficit creates a need to sell more Treasuries than ever. CMBS: The rally continues, with 10 year AAA’s narrowing to about Swaps + 200 (down from a recent all time high of Swaps + 330). It’s not enough for any significant origination, but it’s a step in the right direction. Stay tuned… (David R. Pascale, Jr.)
| | | In the Press | | | | Come Grow With Us | George Smith Partners is expanding its team of top-notch mortgage brokers. We offer highly competitive compensation and an excellent environment in which to work, learn and be supported. GSP provides its 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 Stella Debibi, Director of Business Development and Recruitment, at (310) 557-8336, Ext. 103.
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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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