GSPartners
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Volume XVI | No. 22 | August 6, 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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2.46%
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5 Yr US Treasury
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3.31%
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5 Yr Swaps
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4.30%
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12-MAT
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2.86%
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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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4.04%
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10 Yr Swaps
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4.80%
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11th Dist COFI
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2.83%
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6 Month LIBOR
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3.11%
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30 Yr US Treasury
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4.67%
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| | | Transaction Description: | GSP arranged financing for three multifamily properties in Los Angeles, California for a combined loan amount of $4,385,000. The proceeds from two cash out refinances were used to purchase the third property.
Borrower had 35 days to close all three transactions.
Property #1: Purchase of 22 Multifamily units at 3.30% “going in” cap rate
Existing rents were below market by 35% and subject location is non-rent controlled
Purchaser needed a bridge loan to obtain sufficient proceeds to close escrow and carry the property during the lease up period
Property #2: Cash out Refinance of 16 Multifamily units
To maximize proceeds, borrower elected for monthly adjustable program
Property #3: Cash out Refinance of 6 Multifamily units
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Challenge:
1: Borrower needed to close multiple transactions in a limited timeframe.
2: The margin of error was very low due to reliance on proceeds from both cash out transactions to close on the acquisition of the third property.
3: The appraisal initially valued the purchase property below the purchase price, with stabilized rents 16% below lender’s underwritten value, and 1,200 square feet below recorded gross leasable area.
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Solution:
1: GSP identified an extremely aggressive bridge lender willing to fund within the given time frames. Each of the refinance lenders was aware of the urgency and was able to expedite the processing and closing process.
2: Loan proceeds were constantly balanced to ensure that borrowers had sufficient money to close.
3: GSP contested the appraisal and had the building re-measured by a licensed appraiser within 2 days. Stabilized rent and value were adjusted to substantiate the loan request and the borrowers closed all three loans
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| Property #1: Bridge Financing
Loan Amount: $1,960,000
Rate: Prime + 1.00%
LTC: 61.3% (debt coverage constrained)
Amort: Interest Only
Term: 2 yrs
Interest Reserve: 6 month
Recourse
Lender Fee: 1.00%
No Prepay or Exit Fee
Property #2
Loan Amount: $1,775,000
Rate: Monthly Adjustable
Index: 12-Mat
Recourse
Lender Fee: Par
Property #3
Loan Amount: $650,000
Rate: 6.20%
Term: 5 yr fixed
Amort: Interest Only
Recourse
Key Players: Marc Schillinger |
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| | | | Bridge Lender Aggressively Pursuing Multi-Family Transactions with True Upside Income Potential. No prepayment penalty and high LTV and LTC allow borrower flexibility and maximum leverage. | | Transaction Size: $1-15M | | Rate: Prime + 1.00 | | Loan Term: 2 yrs with option to extend | | Amort: Interest Only | | Max LTV: 75% on "as is" value | | Max LTC: 70% | | Min DCR: 1.10 using 25 year am on Year 2 Stabilized NOI | | Recourse | | Property Types: Multi-Family | | Prepayment: None | | Fees: 1.00% in, No exit | | Geography: National, prefers Western US | Interest Reserve: Typically 6 mos |
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| | | Interest Rate/CMBS Update | The Fed decided today (Tuesday) to keep rates unchanged. Also, the market interpreted the commentary as an indication they may not raise rates for the next few meetings. Surely, the drop in oil prices and the stabilization of the dollar diminish inflationary pressures. It is worth noting that the Fed Governor from Dallas remains hawkish and voted to raise the rate today. The equity markets rallied, causing some selling in Treasuries, the 10 Year is at 4.02%. 30 Day LIBOR remains at 2.46% and should stay in that range as long as the Fed rate is unchanged. Credit Spreads: Credit spreads are volatile, reacting to news of bank closures (Indy Mac, etc), extreme markdowns of collateralized debt pools (Merrill Lynch), etc. Fixed Rate: CMBS was rallying until May. Since then AAA bonds have widened 100 bps and new loans are over 8.00% coupon. The agencies are pricing apartment loans in the 6.00-6.50% range; portfolio commercial loans are approximately 6.20-7.00%. Loan terms range from 5-10 years. Straight LIBOR floaters are attractive. However Swaps have widened, putting upward pressure on short term fixed rate “swapped” bridge loan rates. Stay tuned…. (David R. Pascale, Jr.)
| | | GSP Private Briefing Series | On Tuesday, July 22 2008, Managing Director David Rifkind led a discussion of current trends in real estate capital markets as part of the George Smith Partners Private Briefing Series. The presentation was held at the Los Angeles office of Pircher, Nichols & Meeks. Over 50 lawyers were in attendance, with an additional group joining discussions via closed-circuit access at the firm’s Chicago office.
This latest session of the Private Briefing Series focused on explaining the underlying causes of recent downward macro-economic trends, coupled with an analysis of the universe of current commercial lending sources and equity providers. The discussion included an expanded look into the recent inquiries of Fannie Mae and Freddie Mac, and provided estimations for the recovery of the single family housing at a local and national level. There were also views shared related to the close geo-economic relationship between the United States and Europe.
GSP Director of Business Development Stella Debibi and Analyst Max Friedman were also in attendance. Max Friedman briefed the group on the current state of the CMBS markets, and expectations for the future of the securitized lending environment.
For further information on the George Smith Partners Private Briefing Series, please contact Stella Debibi, Director of Business Development, at sdebibi@gspartners.com | | | 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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