GSPartners
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Volume XVI | No. 25 | September 10, 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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2.49%
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5 Yr US Treasury
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2.88%
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5 Yr Swaps
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3.76%
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12-MAT
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2.66%
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3 Month LIBOR
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2.82%
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10 Yr US Treasury
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3.60%
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10 Yr Swaps
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4.22%
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11th Dist COFI
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2.70%
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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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4.19%
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| | Fannie, Freddie and Implications for CMBS |
Ceding to mounting speculation by the investment and extended community, the Federal Government seized control of Fannie Mae and Freddie Mac in what is being called one of the largest potential bail-outs in history by a governing body.
In this bold move, management control at these two mortgage behemoths will be transferred to the Federal Housing Finance Agency. The US Treasury will in turn inject $1 billion in each company via a preferred share acquisition and pledge further backing to the tune of as much as $200 billion to help mitigate the fall-out resulting from mortgage defaults affecting the two companies.
Here in the US, optimism echoed that of Asian and European reactions from earlier in the day, especially for publicly traded homebuilders who saw jumps in their share prices. Treasury yields also moved up as the recent “flight-to-quality” was quelled and investors showed early signs of demanding less risk premium in the debt markets. As well, CMBS and swap spreads pinched in as investors read this event as a net positive.
Thoughts from CMBS originators on Wall Street revealed the following:
1) This is a move in the right direction, but CMBS paper is de-coupled from other fixed income products. The question is whether fundamentals remain strong (low delinquency on CMBS) and investors will allow tighter spreads.
2) This is a stabilizing influence at a macro-level, with the equity market improvements to show. Drivers for CMBS pricing volatility are distinct from equity and residential markets, and not necessarily effected in a major way by this take-over.
3) The housing market’s downturn affects the general economy and therefore commercial real estate fundamentals (retail, office, hotel income, etc). So these actions to stem the housing woes should help commercial fundamentals and hasten a return of confidence in CMBS
As we aim to gauge the longer term effect of this event on the commercial real estate market, we will focus in the next week on the effect of (i) further news updates related to Lehman Brothers and other financial institutions, (ii) MBS spread stability in the face of continued equity market volatility, and (iii) pricing for Fannie and Freddie capital raises in the near term.
| | | | Transaction Description: | | $15,850,000 Construction Financing for a Ground-Up, Mixed Use Apartment Building in Ventura, CA. GSP arranged construction financing for a 78-unit apartment complex with two retail units totaling 77,358 net rentable square feet. The apartment units range in size from 546 to 1,233 sq. ft. and are expected to rent for an average of $2.50 per foot. The subject property sits on 1.40 acres of land and is located within the newly redeveloped Downtown Ventura. The project was originally conceived as 75 condominium units and was reconfigured as a rental due to current market conditions. The in-fill site is currently improved with a vacant industrial building that was previously occupied by an owner-user. The developer plans to demolish the existing improvements and commence construction in the fourth quarter of 2008. |
| | Rate: Fixed at 7.25% | | Term: 2 yrs with one 6-mo extension option | | Amort: I/O | | LTV: 55% loan to “as-if” complete value | | LTC: 70% | | Prepayment: Open | | Recourse | | Lender Fee: 1% | |
Extension Fee: 0.25% for each extension
Other: Existing land loan was subordinated to the new senior construction loan
Key Players: Andrew Levant,
Gilda Rivera
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| | | Speakers Corner | September 22, 2008
Andrew Levant, GSP Senior Vice President, will participate on a panel at the “Core Network” Fall Conference. The event will take place on the evening of September 22 at the Hollywood Roosevelt Hotel.
Panel Topic: Current US Market Conditions and Future Prospects
Moderator: Frank Buckley, Principal, Ramsey Shilling
Other Panelists Include Representatives from:
· Fortress Capital, a hedge fund
· Essex Realty, a REIT
· A national developer (to be determined)
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October 2, 2008
Thursday, 8 am – 5 pm with a cocktail reception following
Gary M. Tenzer, GSP Principal/Senior Director, will moderate a panel at APARTMENTS 2008, produced by Real Estate Media publishers of Real Estate Forum, Real Estate Southern California, GlobeSt.com and the RealShare Conference Series.
Panel Topic: With Dislocation Comes Opportunity- Surviving Today's Capital Crisis--Who will Fill the Debt & Equity Financing Void for the Next 18 Months and into the Future?
Panelists Include:
· Brian Benson, Chief Lending Officer, Imperial Capital Bank
· Barbara Dugas-Patterson, Senior Vice President & Regional Director, Citibank
· Cheryl Higley, National Director of Multifamily, RBC Capital Markets
· David Kadin, Senior Director, Investments, Wrightwood Capital
· Heidi McKibben, Vice President, Fannie Mae
· Scott Lee, Vice President, GE Real Estate
· Philip Powers, Senior Vice President, Security Pacific Bank
The Westin Bonaventure, 404 South Figueroa Street, Los Angeles, CA 90071
| | | 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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