GSPartners
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Volume XVIII | No. 28 | July 14, 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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0.34%
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5 Yr US Treasury
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1.79%
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5 Yr Swaps
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2.01%
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12-MAT
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0.38%
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3 Month LIBOR
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0.53%
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10 Yr US Treasury
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3.03%
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10 Yr Swaps
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3.04%
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11th Dist COFI
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1.79%
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6 Month LIBOR
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0.75%
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30 Yr US Treasury
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4.01%
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| | | Transaction Description: | | $15,300,000 (4% Interest Rate, 65% LTV, 12% Debt Yield) Senior Loan on Industrial in San Diego, California GSP arranged senior permanent financing for three warehouse distribution buildings totaling ~230,000 sf. The buildings are 97% leased to five tenants with leases expiring from 2011-2016.
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Challenge: The industry sector of several primary tenants has suffered in the recession. In addition, rollover is concentrated in 2011, 2014 and 2016. The market is 13% vacant, which posed a potentially large hit to underwritten cash flows. Finally, the prior uses in the area implied potential environmental risks. |
Solution: GSP worked with the lender to distinguish the true competitive set from the general market and thereby established a 7% market vacancy for underwriting purposes. GSP also helped the lender get comfortable with the strength of the tenants and the location of the subject property in the event a tenant did vacate. Finally, GSP helped avoid a Phase II by satisfying concerns about contamination with a Phase I enhanced by the sponsor’s environmental insurance. |
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| | | | Fixed Rate Loans with No Prepay? Yes!
Portfolio lender is funding 5 year fixed rate loans with no prepayment penalty. This program is ideal for borrowers looking to lock in financing costs and retain flexibility. Most transactions are in California, but can go nationwide in good markets. Lender especially likes health care oriented properties such as medical office, surgery centers, etc. Will also finance standard office, retail, industrial. Single tenant properties ok with some structure for rollover reserves, etc. "Old Fashioned" simple documentation with low closing costs and smooth process. Lender will consider loans up to $9,000,000, but sweet spot is about $5,000,000. | | Transaction Size: $1,000,000 to $9,000,000 | | Rate: 6% to 7% range | | Loan Term: 5 years | | Amort: 25 year | | Max LTV: 75% | | Max LTC: 75% | | Min DCR: 1.25 (after reserves) | | Recourse | | Property Types: Retail, Office, Industrial, Med Office, other Health Care | | Prepayment: None | | Fees: 1% | | Geography: Nationwide |
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| | | Hot Money | Life Company Funding Fixed Rate, Non Recourse Bridge Loans Nationwide Lender will consider Multifamily, Office, Industrial, Retail and selected Hospitality or Marinas. Lender understands Marina financing which is unique. Properties can be stabilized, near stabilized, partial lease up. No construction, but tenant improvements ok. Transaction sizes considered range from $20,000,000 to $40,000,000. Max LTV: 75%. Fixed rates range from 6% to 9%, depending on property dynamics. Typical structure is 2 year bridge with 2 x 1 year extensions. Interest only available for much of the loan term. Lender fee is usally 1.0%. | | | Hot Money | Well Capitalized "Low Profile" Bank Funding Transactions $5,000,000 and Up Lender likes large transactions, as they have no maximum on loan amount. This is traditional bank lending for cash flowing properties, ie flexible prepayment, floating rate. For retail, office, and Industrial they underwrite to 65% LTV, 1.20 – 1.25 DCR. They will lend on select hotels, at a 1.5 DCR. Typical pricing is 6 month LIBOR (floored at 2.5%) + 2.5%, 5 year term, 25 year amort, no prepayment penalty. Southern California preferred. Borrower can opt to swap or buy a LIBOR cap in order to fix the rate. | | | 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. | | | Join Us on LinkedIn | George Smith Partners is now on LinkedIn. Click here to join the George Smith Partners group to get access to current conversations and topics. | | | Pascale's Perspective | The 2nd half of 2010 is upon us. Good corporate earnings news has shifted the consensus from "double dip" to "slower growth" That passes for good news these days. Is this the "new normal" as first postulated by Pimco's Mohamed El-Arian last year? Anemic job growth, virtually no inflation or possible deflation, bumpy housing markets, sputtering consumer demand, etc. What does it mean for real estate? First off, rates should remain low. However, credit spreads will widen and risk appetite will lessen if bond buyers and/or lenders perceive macro economic forces threatening the fundamentals (ie rents, vacancy).....Stay tuned.....David R. Pascale, Jr | | | Press Box | David Rifkind was quoted in MSNBC article on the state of the Commercial Real Estate recovery. Click here to read the story. | | | Thoughts on Freddie and Fannie's Future -- "Breaking The Box" Blog | Nick Silbergeld analyzes the state of the agencies. To read the post, click here. | | | No FinFacts Next Week | FinFacts will not publish next week and will return July 28. |
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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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