GSPartners
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Volume XVIII | No. 45 | December 23, 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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0.26%
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5 Yr US Treasury
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2.05%
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5 Yr Swaps
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2.19%
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12-MAT
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0.33%
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3 Month LIBOR
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0.30%
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10 Yr US Treasury
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3.39%
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10 Yr Swaps
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3.45%
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11th Dist COFI
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1.65%
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6 Month LIBOR
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0.46%
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30 Yr US Treasury
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4.47%
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| | | Transaction Description: | | Via Equity Placement of $2,991,000, George Smith Partners Assists Client With Land “Arbitrage” Purchase in Santa Monica GSP arranged private equity for the purchase of a 15,000 sf, vacant office building on 4 city lots near the 3rd St. Promenade in Santa Monica. Our client, already an experienced developer and “known quantity” in Santa Monica, purchased the property with the knowledge that he can re entitle the site for approximately 85 residential apartment units and nearly 10,000 sf of commercial space. As an office building and parking lot, the basis was “retail.” But as a re-entitlement play, the land basis is very attractive. GSP was tasked with finding an equity source that would recognize the entitlement opportunity. Just like the “old days” we secured a source who provided 90% of the capitalization on attractive terms, allowing our client to close and move forward with the entitlement and development process. Of note, we found a number of quality equity sources interested in this opporutnity. This transaction is emblematic of the current market: there is equity for quality sponsors with deep, current knowledge of their markets and product types. This transaction would have been less probable 6 months ago. |
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| | | Transaction Description: | | $3,832,500 Fannie Mae Financing for 54 Unit Multifamily Complex in Van Nuys, California
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Challenge: There was a significant amount of HUD tenants in the building and the economic occupancy was very close to the minimum thresholds required by Fannie Mae. Also, the actual collections of the HUD rents were delayed by 60 days or more, so the lender struggled to count that income as collections on a monthly basis. This put the loan outside of the required 90% economic occupancy and threatened to inhibit our ability to obtain an approval. Rates also increased above the underwriting floor of 5.50% during the approval process.
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Solution: GSP was able to provide the lender with a detailed summary of trailing income collections to demonstrate that the delays in HUD payments were the only reason why the economic occupancy dipped below the required 90%. Every tenant was individually accounted for and summarized for the lender during each month of the loan process. GSP was also able to work with the lender to ensure that this discrepancy did not delay the final approval process in order to protect the borrower from further rate increases or reduction of proceeds.
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| | | Hot Money | Specialty Single Tenant Lender Offering Unique Financing Program for Single Tenant Credit Net Lease Transactions GSP is in application with this lender on a CVS transaction. Pricing is 5.50% fixed with no prepayment penalty. Lender will consider 10 year term with a 20 year amortization (10/20) or 15/15 or possibly 15/20 structures. Must have remaining lease term. Loan sizes considered are generally $2,000,000 to $10,000,000, tenant must be investment grade. Lender fee is 1.0%. | | | Hot Money | Nationwide Perm Lender Offering Fixed Rates with No Prepayment Borrowers can lock in a fixed rate for 5 years and retain flexibility with this program. Rates are usually 6.00-6.50% (note that this is competitive with CMBS due to Treasury run up). Lender will go up to 65-75% LTV for office, medical office, industrial retail, healthcare and some special purpose. Lender will not lend in MI, FL, NV or AZ. Loan Sizes: $1,000,000 - $9,000,000; Loan Term: 5 years or 5 + 5; Amortization: 25 years; Max LTV: 65-75%; Min DCR: 1.25-1.45; Lender Fee: 1.00%; Prepayment: None; Recourse | | | Hot Money | CMBS-Spreads Tighten, Update: Hotel Underwriting Standards Emerge The good news is that the CMBS market is strong with new lenders appearing (or reappearing) at the rate of 1-2 a month. More lenders equals heightened competition for transactions. Also note: Hotel transactions are being quoted. Some high profile hotel loans have funded recently (including large portfolios and big one off transactions such as Times Square Hilton). Hotels are being underwritten conservatively at this time. Lenders are "stressing" the income as follows : historical occupancy is lowered to 70-75% (regardless of actual), then the resulting NOI is underwritten to a 12% debt yield to determine proceeds. Right now, 10 year loans are being priced as low as Swaps + 2.25-2.50 or about 5.90%. Historically, this is still a good non-reourse rate for office, retail, industrial, hotels, etc. Some lenders will size prime transactions to a 9.5% debt yield, 75% LTV. Forecasts call for big volume in 2011. | | | 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 | | | Best of the GSP Blogs | | | | 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 | 2010, "May You Live In Interesting Times" Final FinFacts for 2010, what did we learn this year? Here are some highlights: (1) CMBS came back faster than we expected, remember that it was still "dead" at the beginning of the year. There was a TALF aided "glimmer of hope" in January with the DDG pool, then February MBA saw more talk and then the "landmark" non-TALF aided JP Morgan pool in June, and we were off to the races; (2) "Tale of Two Markets" Cap rates plunged on highly bid upon "core" properties in major cities, while secondary markets are languishing. Potential trend for 2011: REITs and private equity may start bidding on "the best" secondary market properties in order to bulk up and hit their yield targets; (3) The Fed's independence and power is being questioned both here and abroad, 2011 will bring more scrutiny; (4) No grand "forcing mechanism" has emerged to bring back transactional velocity as money center banks, regional banks, community banks, servicers, etc are all on their own schedules as far as asset disposition. Look for more "choppy" velocity in the next few years......Stay tuned.....David R. Pascale | | | 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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