FINfacts XVIII-23

GSPartners

Volume XVIII | No. 23 | June 2, 2010

KEY RATE INDICES
Prime Rate	3.25%	1 Month LIBOR	0.35%	5 Yr US Treasury	2.13%	5 Yr Swaps	2.48%
12-MAT	0.40%	3 Month LIBOR	0.54%	10 Yr US Treasury	3.33%	10 Yr Swaps	3.44%
11th Dist COFI	1.82%	6 Month LIBOR	0.76%	30 Yr US Treasury	4.23%

Transaction of the Week

Transaction Description:

100% of Cost Financing for Homebuilder Subdivision Completion and Discounted Payoff of FDIC Owned Note GSP arranged two construction loans totalling $3,000,000 and $1,250,000 of private equity that provided 100% of the financing required for a homebuilder to pay off debt with the FDIC and complete a small subdivision. Financing included a funded interest reserve. A regional homebuilder with legacy issues, impaired balance sheet and virtually no cash negotiated a discounted payoff of a small, partially completed subdivision. The project debt was held by the FDIC and the payoff offer required a quick close. The equity provider underwrote the project and provided the full amount of the required hard money deposit within 10 days of introduction to the project. The construction lender underwrote the project and closed within 40 days of introduction to the project. The two construction loans are on adjacent pieces of the subdivision: one on partially completed homes and the other on lots. GSP was able to arrange a capital structure that provided the homebuilder a financial team to help rebuild its business coming out of the downturn. Neither lender had prior experience with the developer or with each other and it was necessary to quantify market, legacy and construction risks and to demonstrate that the business plan was well within the builder’s ability to in spite of limited financial resources.

Rate: Construction Loans: 10.99%; Equity: 12% plus profit participation

Term: 1 year

LTC: 100%

Recourse

Broker: Craig Hamilton

Hot Money

HIGHLIGHTS

Brand New Single Tenant Non Recourse Financing Program This lender looks at tenant strength and real estate, they will lend on sub-investment grade single tenant properties with strong real estate attributes. Lender will consider lease terms as short as 7 or 8 years. Note that the loan terms are shorter than lease. Examples: 3 year loan term for 7-8 years of lease term, 6-10 year loan term for 15-20 years of lease term. Pricing is floating over LIBOR with cap or swap available. Some loans may be interest only depending on transaction strength.

Rate: 30 day LIBOR + 3.50-5.00%

Loan Term: 3-10 years

Prepayment: Lockout min 18 months, then combination of set prepayments (1-2%) or defeasance

Fees: up to 1%

Hot Money

"Low-profile" Mezzanine/Equity Source Provides $1 million to $10 million Loans/Investments with Consideration Given to Select Larger Investments Structures include: Participating Subordinated Debt, Joint Venture Equity, Mezzanine Debt, Bridge Loans. Terms up to 36 months. Secured by trust deed / mortgage or JV/LLC structure. Will consider Single Family Residential, condominium and townhomes, apartment projects, land entitlement and development. Georgraphy: California, Hawaii, Nevada, Oregon, Washington, Arizona Note: this is the private equity source in the above transaction.

Hot Money

Aggressive Owner User Program Strong national lender looking for local presence and larger "footprint" in Southern California. This program is benefitting from a massive US Government committment to help small businesses. This is the highest possible leverage in the marketplace. Current spreads over weekly Treasury Constant Maturity Index (TCM) are between 2.00-2.50 basis points depending on overall internal risk rating after underwriting. Maximum LTV is 75% on conventional but up to 90% with SBA component. Partial principal paydown allowed during fixed term with no penalty. Borrower also has the option to lock interest rates prior to close for 0.50 fee. This particular lender is looking for heathly 2 years trailing income on corporate and personal returns. They do not require depository relationship like a majority of other lenders near this spread level Current Interest Rates are as follows based on weekly Treasury Constant Maturity Index. 5 year fixed: 4.10-4.60% 7 year fixed: 4.78-5.28% 10 year fixed: 5.33-5.83% For the 90% transactions, the SBA adds a 2nd TD priced at the SBA debenture rate. Currently it is approximately 5.52% for 20 year fixed amortized over 20 years. Transaction Size: $750,000-$10,000,000; Loan Term: 20 years (10 years fixed with reset); Amort: 20-25 years; Max LTV: 75% for conventional, 90% with SBA component; Property Types: Owner User (usually industrial or office); Prepayment: 5-4-3-2-1; Fees: Par

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

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Pascale's Perspective

Focus on Credit Markets: Is CMBS going to benefit from a "flight to quality"? The overall "fear factor" in the markets has calmed down for now. Credit spreads widened across the board during May's panic as investors flocked to Treasuries. Lately, bond buyers have been picking up bargains on bonds that dropped in price due to Europe and not the creditworthiness of the bond. This includes CMBS, corporates, etc. Also, some major institutional buyers are favoring CMBS and other bonds with some kind of "default collateral" (such as real estate). This may become a trend, too early to tell...Stay tuned.....David R. Pascale, Jr.

GSP Closes our First "CMBS 2.0" Transaction

Steve Bram and his team have closed a $24,500,000 full leverage transaction at 5.60% for 5 years More details in next weeks issue.

FINfacts Newsletter XVIII-23

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