GSPartners
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Volume XVI | No. 23 | August 14, 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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2.47%
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5 Yr US Treasury
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3.17%
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5 Yr Swaps
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4.16%
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12-MAT
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2.85%
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3 Month LIBOR
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2.80%
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10 Yr US Treasury
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3.90%
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10 Yr Swaps
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4.64%
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11th Dist COFI
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2.83%
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6 Month LIBOR
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3.10%
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30 Yr US Treasury
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4.51%
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| | | Transaction Description: | | $10,000,000 Bridge Loan (74% LTC) for a Former Single Tenant Office Building that was Remodeled and Converted to Executive Suites in Beverly Hills, CA. GSP secured bridge financing to complete the tenant improvements for the remodel/conversion and provide funds for the final leasing of the 3-story, 21,000 sq. ft, office building, which also includes significant in-place ancillary income from rooftop billboards and a cutting edge interior window sign. |
Challenge:
Construction loan to bridge loan: Existing lender unwilling to fund additional dollars for remaining conversion costs to all executive suites or provide supplemental interest reserve and cash-out.
Proving the depth of market for executive suites and valuing the ancillary income sources: The property has significant ancillary income from several different sources: 1) Rooftop billboard, 2) Interior window signage, 3) Parking, and 4) Cell site. Many of these revenue sources did not have a long history of payments. Additionally, lenders expressed concern with the overall depth of executive suite market.
Reserves, cash-out, and earn-out: Project required a supplemental interest reserve until reaching stabilized occupancy. Borrower requested cash-out at funding with a full earn-out.
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Solution:
GSP worked closely with the borrower and appraiser to provide comps for both the ancillary income stream and the executive suites. GSP persuaded the lender to consider borrower’s proven success with the existing leasing and the overall soundness of the business plan. GSP structured supplemental interest reserve and negotiated cash-out at closing and a full earn-out upon reaching 90% occupancy and 1.25 DCR. |
| Loan Amount: $10M
Cash-Out: $461K with additional $1M earn-out (subject to occupancy and DCR hurdles)
TI/LC Reserve: $1.1M
Supplemental Interest Reserve: $390K
Rate: 6.5% fixed
Term: 3 yrs
Prepayment: 2%, 1%, open at par thereafter
Amort: Mo 1-18 interest only; Mo 19-36 amortized at 25 yrs
Lender Fee: 0.75%
Recourse: Full Recourse
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| | | Interest Rate/CMBS Update | This week the bond market is confronting the possibility of “stagflation.” This was in evidence on Tuesday as there was a sell-off in both the stock and bond markets. Usually when stock prices go down, investors buy bonds. But with an uptick in oil prices (and more inflation fears), investors sold both bonds and stocks and bought commodities. Slow growth and inflation would create a difficult situation for the Fed and investors. The 10 Year T is at 3.95%. This continues the pattern of the last few months where indexes (Treasuries, LIBOR, Prime, etc) have been very stable. Swaps have been relatively stable also. Unfortunately, credit spreads remain high on continuing “credit crisis” news from major financial institutions. 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 – originators and assistants. 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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