GSPartners
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Volume XIX | No. 10 | March 16, 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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0.25%
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5 Yr US Treasury
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1.86%
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5 Yr Swaps
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2.07%
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12-MAT
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.31%
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3 Month LIBOR
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0.31%
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10 Yr US Treasury
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3.21%
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10 Yr Swaps
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3.35%
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11th Dist COFI
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1.48%
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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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4.38%
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| | | Transaction Description: | | $8,800,000 Bridge Financing on a 92-Unit Multifamily Los Angeles Property GSP successfully obtained an $8,800,000 cash-out bridge-to-agency loan secured by a stable infill 92-unit multifamily property in 18 calendar days from application to close. During the closing process, GSP and the Sponsor worked closely with the lender to resolve hurdles related to three estate liens, several unpermitted units, and incomplete historical operating history. |
Challenge: The borrower required a cash-out refinance in order to procure proceeds for the acquisition of an unrelated asset with a pending close date, 18 days after entering in to application. During that time, the lender and client had to address three IRS liens and three unpermitted units. Additionally, a mid-year change in property management clouded the reconciliation of historical operating statements. |
Solution: GSP capitalized on its' strong network of lender relationships to secure a bridge-to-agency loan that maximized proceeds at a reasonable rate within the 18 day requirement. GSP worked with the lender and third party vendors in order to expedite all third party reports within 10 days, remove two estate liens and structure around a third IRS lien. GSP and the client also provided sufficient data to assist the lender in reconciling operating expenses and prove their ongoing viability. The bridge loan will be replaced with permanent agency financing within 90 days. |
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| | | | | | Nationwide On-Book Bridge Program Targets Secondary Markets An international owner/operator of commercial real estate has launched an on-book bridge program to 80% of value. In addition to addressing major metropolitan markets, their sweet spot are the undercapitalized secondary markets, and will lend in tertiary markets for a strong borrower. This non-recourse lender will capitalize an interest reserve for assets with a below break-even debt service on retail, industrial, multifamily, office and select special use assets. Initial loan terms range from 2 to 5 years with yields based on asset and leverage but all-in coupons plus fees fall between 8.5% and 10.0%. Transaction loan sizes will range from $15,000,000 to $50,000,000 for a 30 day to 60 day close. | | Transaction Size: $15,000,000 - $50,000,000 | | Rate: 8.0% - 9.5% | | Loan Term: 2 - 5 years | | Amort: Interest Only | | Max LTV: 80% | | Non-recourse | | Property Types: Four Food Group plus some special use | | Fees: Varies | | Geography: Nationwide |
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| | | Hot Money | California Regional Portfolio Lender Funding Mini-Perm Debt. This lender is seeking quality commercial and multifamily assets in California but will consider properties nationwide with a California sponsor. Three to five year floating rate terms are available with no pre-payment penalty. They will fund up to $15,000,000 but has a sweet spot for transactions between $7,000,000 and $10,000,000. Asset types include office, industrial, retail, multifamily, hotels, healthcare, mobile home parks and condo inventory. They will not consider land or construction at this time. | | | Hot Money | Owner/User Financing up to $15,000,000 for Purchase or Refinance A capital provider is originating larger predominantly owner occupied (more than 50% by square footage) industrial, office or retail properties on a nationwide level. Acquisition financing from $8,000,000 to $15,000,000 is available to 90% of cost. Refinance debt is also available at lower LTVs. This lender also has the capacity to offer a forward rate lock of up to 12 months. No banking relationship is required. | | | 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 | | | What is Defeasance? | Wall Street has returned with a vengeance, with the volume of new loan originations far exceeding the most optimistic projections. In "Conduit 2.0", as this new cycle is referred to, borrowers will have the opportunity to learn from the past and find new opportunities for cost savings as they obtain new debt. One significant area of potential cost savings is in the defeasance process.
What is defeasance? Put simply, it is the substitution of income-producing collateral for a piece of real property to facilitate the removal of an existing lien on the property, without paying off the note. This mechanism allows a property owner to either sell or refinance the property while allowing the note holder to continue to collect the principal and interest it contracted for in the original loan.
Several areas of potential cost savings in the defeasance process are; a) Expanding the definition of Defeasance Collateral, b) Limiting how defeasance is calculated, c) Structuring the defeasance so the borrower receives financial benefit from the timing of the cash flows generated by the substitute collateral. These areas will be discussed in greater detail in the next edition of FINfacts.
Navigating the defeasance process is best approached with a knowledgeable and experienced defeasance consultant. GSP has been fortunate to work with some of the most skilled consultants in the industry and it is our privilege to refer these professionals to our clients and colleagues. Eric Hamermesh | | | 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 | Uncertainty, "Fear Factor" Roil Capital Markets Events in Japan and the Middle East are disrupting equity and debt markets. The tragic earthquake in Japan and the resulting nuclear fallout is unquantifiable at this time. These events have even overshadowed the lowering of Portugal's sovereign debt rating, a reminder that the European debt crisis is alive and well. A massive flight to quality has driven treasury yields down. The 10 year treasury is at 3.21%. Mortgage spreads are widening as risk appetite is decreasing. CMBS desks indicate about 20-30 bps in widening since Monday morning, rate floors are coming into play. Freddie/Fannie spreads narrowed last week and are widening this week. The feeling is that pricing is very fluid right now and "deal specific", lenders are still willing to aggressively bid on the best transactions....stay tuned.....David R. 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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