GSPartners
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Volume XIX | No. 4 | January 26, 2011
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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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2.01%
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5 Yr Swaps
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2.25%
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12-MAT
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0.32%
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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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3.41%
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10 Yr Swaps
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3.49%
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11th Dist COFI
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1.57%
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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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4.58%
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| | | Transaction Description: | | $19,700,000 (5.69%, 10% Debt Yield) Permanent Financing for Neighborhood Retail Center in Northern California. GSP arranged CMBS financing for the refinance of a 96.3% occupied, grocery-anchored retail property in an upscale Northern California suburb. GSP identified a lender willing to provide up to 75% LTV with cutting-edge pricing and minimal reserves.
The transaction was a straight-forward permanent loan on a clean, cash-flowing asset. However, a number of issues demanded GSP’s expertise, including a) significant cash-out and b) a regional anchor with flat sales. Ultimately, the lender satisfied their concerns based on the Sponsor’s excellent reputation and retail experience, as well as the asset’s diversified tenant base and strong performance through the recent market downturn.
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| | | Transaction Description: | | $2,760,000 Take Out Loan for New, Two Tenant Retail Building on Wilshire Blvd in Santa Monica
Our borrower purchased an older, single tenant building on Wilshire Blvd and redeveloped it (virtually from ground up) into a new, 2 tenant retail building leased to two restaurants. We were engaged to provide a full leverage, cash out permanent loan upon lease up and occupancy of the new tenants.
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Challenge: First, the loan per square foot was very high. We needed a lender who understood street level retail in prime west side locations. Second, most lenders were unable to make the exception for a loan greater than 70% Loan to Cost. The borrower added significant value by obtaining strong, long term leases and wanted to us to obtain maximum proceeds. The property was under construction during the loan process and it was important to identify a lender that would not require lease seasoning prior to funding the loan. |
Solution: GSP was able to identify a very aggressive local private bank that would understand the story of the asset and provide the borrower with a low LTV but high LTC loan. GSP was also able to negotiate a 1% prepayment penalty for four years and fund immediately after both tenants opened for business. The flexibility, leverage, and low cost of funds for 7 year fixed was exactly what the borrower was looking for.
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| | | Hot Money | Western States Portfolio Lender Offering Several Unique Structures At present, this well capitalized lender is currently lending in Oregon, Washington, Idaho, New Mexico, Texas and Arizona. They may be lending in California soon. What sets them apart is a multitude of loan coupon structures. Most loans are 10 years with 25 or 30 year amortization. Structures include 10 year fixed with stepped down prepay; or 5 years fixed at a lower rate and the second 5 years at a pre-determined rate. The 5+5 structure allows borrower to prepay at par in year 6 or continue at a rate option determined at the original closing date (very unique). Lender also offers "3+7" with the option in year 4. Rates range from 4.12% for 3 years fixed to 6.50% for 10 years fixed. Rates are also determined by product type (apartments are best), leverage, etc. Terms: Loan Size: $1,000,000 to $8,000,000; Property Types: Apartments, Industrial, Office, Retail; Max LTV: 70-80%; Min DCR: 1.20 for purchase or 1.25-1.30 for cash out refi; Recourse: Yes; Lender Fee: 0.5% - 1.0%. | | | Hot Money | Life Company with Large 2011 Allocation for Loans Pricing Aggressively With attention focussed on the return of CMBS, portfolio lenders are reminding us that they never left and are "back" as big as ever. GSP recently met with a major life company looking for institutional quality transactions $5,000,000 to $50,000,000. Rates for 10 year, fixed rate as low as Swaps + 1.40% (4.86% today). Rates for 5 or 7 years are Swaps + 1.50% - 1.75% (3.70% for 5 years lowest spread) Amort: 30 years, Max LTV: about 60%. Lender services their own loans, so future changes in structure can be accomodated. Forward rate locks available up to 12 months, typical spread premium is 3-5 bps per month. | | | 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%. | | | 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. | | | Speakers Corner | Steve Bram will be speaking on current financing trends and market dynamics at a gathering of ULI's Young Leaders Group on February 9 as part of their "Leading the Way" breakfast series. For more information, click here. | | | Pascale's Perspective | Fed Continuing Bond Purchases Today's Fed statement noted that a gradual recovery is underway and that the controversial "QE2" $600 billion bond purchase program will continue. Why? It seems that the Fed is less afraid of inflation than deflation. In a deflation spiral, consumers expect falling prices and they they become less willing to spend and their wages go down. The spiral or "deflation trap" becomes a self fulfilling prophecy as Paul Krugman recently noted: "the economy may stay depressed because people expect deflation, and deflation may continue because the economy remains depressed" The Fed believes that once deflation starts, it will be nearly impossible to stop. On the other hand, if QE2 and loose monetary policy sparks inflation, the Fed can quickly tighten the monetary supply by raising interest rates. That last part is of concern to real estate investors. Right now, rates are low. But we should be mindful of signs of inflation and a potential "knee jerk" reaction.....Stay tuned.....David Pascale, Jr.
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©2011 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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