FINfacts XX-43

GSPartners

Volume XX | No. 43 | October 31, 2012

KEY RATE INDICES
Prime Rate	3.25%	1 Month LIBOR	0.21%	5 Yr US Treasury	0.72%	5 Yr Swaps	0.86%
12-MAT	0.16%	3 Month LIBOR	0.31%	10 Yr US Treasury	1.69%	10 Yr Swaps	1.78%
11th Dist COFI	1.07%	6 Month LIBOR	0.54%	30 Yr US Treasury	2.86%

Transactions of the Week

Transaction Description:

$3,200,000 Cash-Out Refinance of Retail Center with 50% Occupancy Shahin Yazdi placed the refinance of a regional retail center that was only 50% occupied at funding. This loan offered a partial return of equity to the Borrower and represented 80% of his total capitalization. The property was recently acquired as a bank REO that closed in an all-cash purchase. The five-year term is fixed at 3.9% and offers a five-year extension at then market rates.

Challenge: The property was 50% occupied prior to funding. The Borrower sought to recapitalize his personal balance sheet in this cash-out request on an underperforming asset and requested a longer term loan than is traditionally offered with a reposition/bridge scenario. Ownership was held as a TIC, mandating the requirement that all members participate in the loan due diligence process.

Solution: In-place income at funding supported the debt service with amortization. Market strength was proven as was the prior owners' mis-management of the asset. The low dollars per square foot added significant comfort to our underwriter as did Borrower experience and incentivized the lender to process multiple Borrower applications for this TIC structure.

Rate: 3.90%

Term: 5 Years + 5 Year Extension

Amort: 25 Years; 1st Year Interest Only

LTC: 80%

Recourse

Broker: Shahin Yazdi

Transaction Description:

$4,750,000 Retail/Office Cash-Out Refinance GSP arranged financing for a mixed-use, stabilized retail and office property in a prime Santa Barbara location. The garden-style property has a mix of retail, office, and medical office uses. The Sponsor requested maximum loan proceeds for alternative uses. The 70% LTV, non-recourse loan is fixed for 10 years, amortized over 30 years.

Challenge: Although the Sponsor owned the subject property for over 20 years, most lenders were uncomfortable with the short term leases, ranging from 1 to 3 years. The aggressive loan amount underwrote to an 8.8% debt yield, below what many lenders will accept for commercial real estate.

Solution: GSP demonstrated that historical occupancy exceeded 90% over the last 10 years, allowing lenders to gain comfort with the short lease terms. The local market strength and high Santa Barbara barriers-to-entry added additional comfort to justify the lower debt yield.

Rate: 5.02%

Term: 10 Years

Amort: 30 Years

LTV: 70%

Prepayment: Defeasance

Non-recourse

Lender Fee: Par

Brokers: Steve Bram, Allison Higgins

Hot Money

Middle Market Bridge Debt A West Coast regional lender is stepping up to fill the void of reposition financing on middle market assets from $5,000,000 to $15,000,0000. Transactions may be sized to as large as 90% of current value subject to a 75% LTV exit upon stabilization. Below break-even or vacant assets may be funded with an interest reserve although ground-up construction will not be considered. This non-recourse debt is priced a LIBOR+5.50%, with 1-in & 1-out. Core products and hospitality will be underwritten along the West Coast.

Hot Money

Hospitality Mini-Perm Financing from $5,000,000 Nationwide Limited and Select Service & Extended Stay financing is now available to 70% of value for experienced hospitality owner/operators. The subject property must carry a flag, present stabilized cash flow and be less than 10 years old. Rates start at LIBOR+5.50% floored at the fully indexed rate with no prepayment after the 2nd year. Fixed rate terms may also be available but will require yield maintenance prepay. Terms are from three to five years, amortized over 25 years for this recourse program. Two or three units may be combined to reach the $5,000,000 minimum.

If you have an inquiry regarding George Smith Partners' commercial real estate financing, please contact your GSP representative or Todd August, Chief Operating Officer, at (310) 867-2995 or TAugust@GSPartners.com.

Speakers Corner

Founding Partner Steve Bram will be a featured speaker at The Syndication Summit on Saturday November 17th. Discussions will detail the structuring of a successful partnership, legal and tax issues as well as financial advisory services. The all-day event will be held at the Luxe Hotel in Brentwood. To learn more about the event or on-line registration, click here.

Pascale’s Perspective

GSP extends our condolences and well-wishes to all those affected by the storm in the East.…. I have spoken to several lenders and capital sources based in New York and other eastern cities; and the personal resilience and perseverance I have experienced is astounding. “We have seen worse and we keep moving forward” one long-time Manhattan based loan officer remarked as we went through loan document comments today. He is hosting neighboring families that have no power….. The markets reopened today, Treasury yields are down on the 10 year to 1.69%. There is some selling of the 30 year bonds on speculation that insurance companies may sell long term paper to pay damage claims. Election next week, what are markets looking for? The capital markets loathe uncertainty, ie most investors do not want to see a contested and/or uncertain result. They are looking beyond November to December’s lame duck session where everyone is hoping for decisive action to avert the “fiscal cliff,” the less “band-aide” of a solution, the better. …Stay tuned… David R. Pascale, Jr.

FINfacts Newsletter XX-43

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