GSPartners
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Volume XVIII | No. 18 | April 28, 2010
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KEY RATE INDICES
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Prime Rate
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3.25%
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1 Month LIBOR
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0.27%
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5 Yr US Treasury
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2.54%
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5 Yr Swaps
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2.81%
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12-MAT
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0.42%
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3 Month LIBOR
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0.34%
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10 Yr US Treasury
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3.77%
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10 Yr Swaps
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3.83%
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11th Dist COFI
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1.64%
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6 Month LIBOR
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0.51%
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30 Yr US Treasury
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4.64%
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| Transaction of the Week - Loan Workout | |
| | | Transaction Description: | | GSP successfully completed a CMBS workout assignment for a retail asset in Henderson, NV. GSP negotiated and had the special servicer agree to a discounted payoff equal to 31% of a $4,818,000 loan for the borrower who had defaulted on their securitized loan. |
Challenge: The retail market in Henderson, NV is experiencing continued deterioration, with tenants asking for rent reductions, not paying agreed-to rent or vacating their space. The borrower was unable to make their debt service payments due to the erosion of cash flow and defaulted on the loan. Securitized CMBS loans are overseen by Special Servicers on behalf of CMBS bondholders and the servicers are obligated to resolve the default in a manner that is most likely to maximize the asset’s net present value. Special Servicers oversee the entire pool of loans that make up a CMBS transaction, and oversee multiple CMBS transactions at a time. Due to their dramatically increased workload, the CMBS resolution process with Special Servicers takes many months. Persistence, along with clear and focused communication and thorough analysis is key to ensuring a successful workout in these situations. |
Solution: GSP worked with the Special Servicer to understand their perspective on the asset. GSP conducted extensive market research and analysis to show the Special Servicer that a foreclosure would be the least beneficial action for the bondholders and borrower. Led by Nathan Auslander, GSP used numerous methods to determine the appropriate value for a discounted payoff and presented the solution to the Special Servicer. After a lengthy review, and going back to their brokers and appraisers to reconsider their valuation of the asset, the Special Servicer agreed to a payoff of $1,700,000, equal to 35% of the loan amount.
During the time it took the Special Servicer to accept the proposal, the property had experienced more tenant vacancies, to the point where only 15% of the space was occupied. Eventually, when GSP and the borrower were able to solicit financing options, GSP had to go back to the Special Servicer to request a larger discount. After reviewing the second proposal, the Special Servicer agreed to a $1,500,000 payoff, equal to 31% of the loan amount. The borrower has been able to execute on this basis, and finalize the resolution process with a DPO.
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| | | | Institutional Bridge Money Lender Sees Opportunity in Core Markets This nationwide lender is funding bridge loans ($10,000,000 and up). GSP met with the top executives of the group today in our office. Takeaway quote: "The market recovery is moving faster than we anticipated" Lender is looking to fund transitional properties in core markets for good sponsors. Property type focus is on apartments, grocery anchored retail, selective office and hotels (limited and full service). Lender will fund below break even and most aggressively on apartments, while hotels will size at an approximately 12.5% debt yield. Maximum loan to total cost is 70-75%. Lender will consider future fundings with no neg arb. | | Transaction Size: $10,000,000 and up | | Rate: LIBOR + 4-5%, 1% floor on LIBOR | | Loan Term: 3-5 years | | Amort: Interest only | | Max LTV: 75% | | Max LTC: 75% | | Min DCR: 1.0 for most properties | | Non-recourse | | Property Types: Apartments, Grocery Anchored Retail, Office (some), Hotels | | Fees: 1% plus 1% exit fee | | Geography: Nationwide |
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| | | Hot Money | Equity Update, Major Pension Fund Manager: Fund Manager has $40,000,000 total portfolio containing all major product types and over 150 pension fund clients. Program designed for ground up construction. Does not require prevailing wage for developement. No transactions with entitlement risk. Can fund the land with a site plan and schematics. Program is IRR oriented with short term horizon, ie JV the development and sell at completion or stabilization. Target yields: 20+ IRR, 7.5% return. Gross project cost range: $20,000,000-$40,000,000. Fund will not sign on recourse. 60-65% debt is normal, but can accept up to 80% leverage | | | If you have an inquiry regarding George Smith Partners' commercial real estate financing, asset sales or advisory services please contact your GSP representative or Todd August, Chief Operating Officer, at (310) 867-2995 or taugust@gspartners.com. | | | Pascale's Perspective | Focus on the Fed: The ongoing struggles between the inflation hawks and doves among the Fed governors was put aside in today's Fed meeting announcement due to the "fear factor" over Greece's sovereign debt crisis (potentially spilling over to Portugal/Spain and others). The statement indicated that the Fed was prepared to keep rates at rock bottom for an "extended period". The announcement combined with Germany and the IMF rushing to finalize a bail out package for Greece calmed the markets....for now. Treasury yields (which had been dropping on a flight to quality) actually rose, but expect to see some credit spreads widening after weeks of tightening. Fixed loan rates are still very attractive across the board for multifamily (agencies) and commercial (life companies, CMBS, etc).....Stay tuned....(David R. Pascale, Jr.) | | | Join Us on LinkedIn | George Smith Partners is now on LinkedIn. Last week our membership surged to over 1,200 members. Click here to join the George Smith Partners group to get access to current conversations and topics. | | | Come Grow With Us | George Smith Partners is expanding its team of top-notch mortgage brokers/originators. 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 Todd August, Chief Operating Officer, at (310) 867-2995. |
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©2010 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of
George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
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