GSPartners
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Volume XVI | No. 31 | October 22, 2008
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KEY RATE INDICES
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Prime Rate
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4.50%
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1 Month LIBOR
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3.28%
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5 Yr US Treasury
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2.58%
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5 Yr Swaps
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3.53%
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12-MAT
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2.48%
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3 Month LIBOR
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3.54%
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10 Yr US Treasury
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3.65%
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10 Yr Swaps
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4.07%
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11th Dist COFI
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2.69%
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6 Month LIBOR
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3.98%
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30 Yr US Treasury
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4.13%
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| | | Transaction Description: | | $4,000,000 (60% LTV, Non-Recourse) Cash-Out Refinance, of Non-Anchored Multi-Tenant Building in Downey, CA. GSP secured permanent cash out financing for a maturing CMBS note. |
Challenge:
1. Property experienced a 10% economic vacancy during the application process and the space was not leased at the time of close. The lender wanted additional proof of market vacancy levels to justify underwriting.
2. Lender agreed to a 120 day rate lock at application. Rates for this lender increased by 50 basis points during the processing of the loan.
3. New environmental reports were ordered due to a historical existence of a dry cleaning operation.
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Solution:
1. Due to the strength and experience of the borrowing entity, the lender agreed to make exceptions to their typical underwriting.
2. Lender extended the rate lock up to a total of 150 days at no additional cost due to the relationship with George Smith Partners.
3. Environmental Phase II report was ordered and completed within a 10 days
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| | Rate: 6.20% | | Term: 7 yrs | | Amort: 30 yrs | | LTV: 60% | | DCR: 1.25 | | Prepayment: Step-Down | | Non-recourse | | Lender Fee: Par |
Key Players: Marc Schillinger
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| | | | Nationwide Bridge Lender, Value-Add and New Construction. Must be heavily preleased - 75% and above. Multifamily, office, retail (no exercise facilities or entertainment concepts), industrial (no cold storage). | | Transaction Size: $7-35M | | Rate: L+375-400 or Prime +2%, 7% Floor | | Loan Term: 12-30 mos, with extensions to 36 mos | | Max LTV: 65-70% stabilized value | | Max LTC: 85% | | Min DCR: 1.25, 9.66 constant for 1.0x | | Recourse Negotiable | | Fees: 1-1.5% | | Geography: Nationwide |
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| | | Market Update | Credit markets continue their “slow thaw” as the Fed continues to backstop debt. This week the Fed provided $540 billion of loans to buyers of commercial paper, providing much needed liquidity in the short term money markets. LIBOR continues to drop, the 30 day LIBOR is at 3.28% (down from a high of 4.75% earlier this month). In other good news, the highly watched “TED spread” (the difference between LIBOR and Treasuries), dipped below 3.00% yesterday. Note that in a normally functioning market, TED should be about 0.25%, it recently hit 4.70% just before the passage of TARP. Swap spreads are also narrowing, with the 10 year Swap spread at a historically low 0.46%. CMBS update: Spreads have blown up to record highs on all bond classes; there is virtually no origination at this point. A 10 year CMBS loan would price at about 12.00% (!) today.
This week Treasury yields are remaining on the low side (compared to recent months) as the 10 year is 3.80%. This is due to recent “flight to quality” upon recent selling in the equity markets and spread widening in all types of credit bonds—corporates, mortgage backed, etc. The market has not reacted to the release of Fed minutes that indicate their next move will be to raise rates due to inflation concern. LIBOR has stayed put, but watch for it to rise with the Fed rates along with Prime. Credit Markets: The story for the past few weeks has been the GSE’s (Fannie and Freddie). The consensus was that the next step to resolving the credit crisis involved more direct government support (bailout?) for the two mortgage giants. This week, major analysts have opined that the GSE’s are sufficiently capitalized at lease “through the end of the year.” Now some analysts are calling for a merger. Stay tuned… (David R. Pascale, Jr.) | | | GSP Private Briefing Series | David Rifkind, GSP Principal/Managing Director, along with Gary M. Tenzer, GSP Principal/Senior Director, led the latest successful round of the GSP Private Briefing Series at the law offices of Goodwin Procter LLP on Wednesday, October 15, 2008. This lunchtime session presented the insider view of the current state of the US Commercial Real Estate Capital Markets as seen from two industry veterans. Max Friedman added comments related to the recent trends in commercial banking activities and government intervention. This presentation is geared toward industry professionals whose practice is in Commercial Real Estate, Law, Accounting or Government. These briefings do qualify for MCLE credits. If you are interested in having Mr. Rifkind and his team present to your firm, please contact Stella Debibi at 310-557-8336 Ext. 103 or 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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