GSPartners
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Volume XX | No. 45 | November 12, 2012
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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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0.21%
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5 Yr US Treasury
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0.62%
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5 Yr Swaps
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0.75%
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12-MAT
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0.17%
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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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1.59%
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10 Yr Swaps
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1.65%
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11th Dist COFI
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1.04%
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6 Month LIBOR
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0.53%
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30 Yr US Treasury
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2.73%
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| | | Transaction Description: | | 85.8% LTV $4,700,000 Re-Capitalization of a Maturing TIC Note with Senior Debt & Preferred Equity GSP placed a two-tranche restructure involving the “roll up” of a Tenant-In-Common (TIC) ownership for a 73,000 square foot, multitenant flex industrial building in the Pacific Southwest. GSP successfully arranged a 10 year, fixed rate refinance 1st trust deed with a life insurance company and added a layer of preferred equity to obtain the required loan proceeds. The combined capitalization netted the $4,700,000 required to recast the loan down to a 1.05 debt coverage ratio. |
Challenge: The current loan was due to expire. With confirmation that the lender would not extend the balloon, an NOD date was looming. Ownership was held as Tenants In Common; a structure avoided in today’s financial climate, and in most cases, is not financeable. The subject property had diminished in value significantly since the sponsorship group had acquired the asset. Sufficient leverage from a senior capital provider was not obtainable. Sponsorship was unwilling to dilute their interest with more equity infused in the property. |
Solution: The TIC owners agreed to “roll-up” into a new LLC under IRS code 721. This allowed them to contribute the property to a new single purpose ownership entity without realizing a capital gain or loss. GSP sourced a low priced life company execution and identified a preferred equity source that would not take a promoted interest in the entity, just a coupon. The resulting blended cost of capital was in line with the Borrowers’ existing senior coupon and did not require an additional equity infusion. As the Sponsor expressed; “Two years ago we were contemplating giving the asset back, or best case bringing in new money and getting severely diluted. Neither one of these events happened. You guys really saved the day for us with the creative structure you were able to put together.” |
| | Rate: Senior 4.20%; Pref Equity 10% Current Pay Rate (5% Accrual)- 5.98% Blended Current Pay | | Amort: Senior 25 Years; Pref Equity Interest Only | | LTV: 85.8% | | DCR: 1.05 | | Brokers: Malcolm Davies, Loren Bedolla |
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| | | Transaction Description: | | $3,200,000 Acquisition for a San Fernando Valley Industrial Building GSP arranged the acquisition financing for a single-tenant industrial building in San Fernando Valley, California. Our client had reached capacity in their existing building and this acquisition added storage and an additional work area, allowing them to expand their business. The 90% Loan to Purchase financing was arranged under the SBA 504 program, where the rate of the Bank’s 1st Trust Deed and SBA’s 2nd Trust Deed blended to a 4.375% fixed rate with a 20 year term and amortization. As an acquisition, time was of the essence and the Borrower was being pressured from outside sources to execute, yet was concerned about making the most viable choice for the long-term benefit of his business. GSP compiled a detailed yet easy to follow savings analysis comparing conventional debt to SBA financing. This summary allowed the Borrower to quickly weigh his financial options and move forward to funding. |
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| | | | Non-Recourse Reposition to 65% of Proforma Value A true bridge lender looks to their exit valuation in determining loan proceeds. GSP has identified a national firm funding to 65% of “real lender value” upon stabilization. Loan requests from $10,000,000 to $100,000,000 are priced 6% to 8% with an option to layer on additional preferred equity behind their own senior if additional funds are required. In-place cash flow is not required at funding. Core assets, hospitality and condo conversions are considered on a non-recourse basis. DPOs will require a fresh equity contribution from the borrower. |
| | | Hot Money | Portfolio Capital Provider Expands Market Presence with Pre-Payable Commercial Debt A Pacific Northwestern Bank has expanded their commercial lending market for stabilized assets. Loan requests from $2,000,000 to $15,000,000 will be considered for core products (Industrial, Retail, Office & Multifamily) from the San Francisco Bay Area north to the Canadian Border. Rates start in the low-4% range for five year fixed. Ten year fixed terms are also available to 75% LTV. Program guidelines offer very flexible prepayment options, no legal fees, reserves, tax or insurance impounds. | | | 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. | | | George Smith Partners Welcomes Peter Kleinberg | Mr. Kleinberg joins George Smith Partners, Inc. as an Assistant Vice President bringing seven years of commercial real estate experience to the firm. Prior to joining GSP, Peter was a Vice President at SunTrust Bank in Atlanta, where he helped create and execute the internal loan sales platform for distressed commercial real estate debt. Mr. Kleinberg also has experience in the mezzanine debt and equity markets, having worked in both a financing and sponsorship capacity prior to attending graduate school. Mr. Kleinberg received a Master of Business Administration degree from the Owen Graduate School of Management at Vanderbilt University and a Bachelor of Arts degree from the University of Colorado at Boulder | | | Pascale’s Perspective: | The Fiscal Cliff Now that the election is over, investors are concerned about the ramifications of the combination of tax increases, spending cuts, etc set to take place at year end, aka the “Fiscal Cliff”. Markets are on edge: last week’s election returns the same dynamics that were in place in the summer 2011 debt ceiling negotiations (President, House, Senate). That messy, last minute compromise resulted in a downgrade of the USA’s credit rating. (By the way, that issue may need to be dealt with again as early as February 2013). Investors will “sit on the sidelines” if they sense the uncertainty and brinksmanship that marked the debt ceiling negotiations. Treasury yields have lowered on the flight to quality. So far, no significant spread widening has occurred. How will it affect real estate? In addition to the potential credit market disruptions that may occur, many business leaders and retailers are pointing out that holiday shoppers may be hesitant to spend. They are demanding a “fix” or “plan for a fix” before the Black Friday kickoff. Note that retailers generally book 20-30% of their sales in the month between Black Friday and Christmas Eve. Negotiations are set to begin this Friday. ...Stay Tuned... David R. Pascale, Jr. |
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©2012 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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