GSPartners
|
|
|
|
Volume XX | No. 48 | December 12, 2012
|
|
|
|
|
|
|
|
|
|
KEY RATE INDICES
|
|
Prime Rate
|
3.25%
|
1 Month LIBOR
|
0.21%
|
5 Yr US Treasury
|
0.65%
|
5 Yr Swaps
|
0.77%
|
|
12-MAT
|
0.17%
|
3 Month LIBOR
|
0.31%
|
10 Yr US Treasury
|
1.69%
|
10 Yr Swaps
|
1.71%
|
|
11th Dist COFI
|
1.01%
|
6 Month LIBOR
|
0.52%
|
30 Yr US Treasury
|
2.88%
|
|
|
|
| | | Transaction Description: | | $7,000,000 Cash-Out Refinance of a Single Tenant Retail Building George Smith Partners successfully placed the 100% cash-out refinance of a high-end, single-tenant retail building on the World famous 3rd Street Promenade in Santa Monica. The 7,500 square foot building is home to the first West Coast Converse retail location, housing the largest collection of Converse footwear and apparel. The 15 year loan term exceeds the single tenant lease by six years. Fixed at 4.98%, the 30 year due in 15 year term offers a step-down prepayment option. |
Challenge: The single-tenant lease matures in 9 years, creating a substantial event risk 6 years prior to the loan maturity. The loan request sized out to $933 per square foot, virtually impossible to comp-out in Santa Monica outside of the Promenade. The Borrower required a long-term fixed rate with a pre-payment option that excluded yield maintenance or defeasance. This cash-out loan represents a significant return of equity and the property was Free & Clear prior to funding. |
Solution: The 3rd Street Promenade has evolved into Southern California’s premier retail and entertainment destination. GSP identified a portfolio lender who recognized that this location offers pedestrian traffic unparalleled anywhere in the State, and was therefore very comfortable in the high loan per foot and the lease event risk. The Capital provider was willing to provide an alternative prepayment schedule given the low LTV. |
| |
|
| | | Transaction Description: | | $6,000,000 Bridge Loan to repay Chapter 11 Creditors GSP arranged the bridge financing of a stalled residential condominium project along the a Pacific Northwest waterfront. The project consisted of a 204- Slip Marina and entitlements for 208 to-be-built condominium units. The original construction lender was seized by the FDIC late 2007 and the project stalled mid-stream. At the time of the bank take-over, $44,000,000 of developer equity and bank debt had been invested in to development. The FDIC later forgave $24,000,000 of the then outstanding debt as a result of the bank failure. Our Sponsor has since engaged GSP to provide construction financing for what is now a re-entitled 373-Unit Apartment site. |
Challenge: Although the FDIC settlement forgave a bulk of the bank debt, many creditors were not paid when the project stalled. The sponsor entered into bankruptcy, ultimately exiting in 2011 with a court approved re-organization plan that included the repayment of all mechanic’s liens. The Developer was ordered to pay off the creditors by a specified date or the property would revert back to the creditors. Timing was critical with no opportunity for an extension. |
Solution: GSP identified a private bridge lender who became comfortable with the special purpose use, Sponsor credit issues and partial development of the site. The marina was completed and 95% occupied, offering a nominal cash flow to cover taxes and operating expenses. All grading and horizontal improvements were finalized with finished pads. A parking garage for the residential units had been completed to further support the “As-Is” value. GSP also identified a qualified ‘exit’ for the bridge lender having secured a qualified term sheet for the final phase of construction. While the construction due diligence was underway, funding could not occur timely to meet the court ordered schedule. The GSP lender funded literally in the 11th hour. |
| |
|
| | | | Bridge + Mezzanine & Preferred Equity GSP is placing transitional loans with a $55B private equity firm nationwide. Non-recourse loan requests over $10,000,000 will be underwritten up to 80% of cost (including reposition costs). Cash flow must be present at close as a minimum 6.5% going-in debt yield is required. Pricing starts in the low 5% range based on risk for a three to five year term. Core products plus student housing and self-storage will be considered. The same fund will offer mezz/pref equity behind their own first or an alternative capital source. Transactions over $5,000,000 will be structured to an actual 1.0 (breakeven) DCR at close with an 8% current pay, allowing for an accrual to 12%. |
| | | Hot Money | Life Company Non-Recourse Debt from $2,000,000 GSP identified a national Life Insurance Company funding transactions as small as $2,000,000 on a non-recourse basis. LifeCo transactions under $5,000,000 typically require a repayment guarantee. Terms from five years to 25 years are available with flexible pre-payment options. Core assets are financed to 65% of market value, 70% for multifamily and student housing. Self-storage and unanchored retail have a 50% advance rate. Forward commitments may also be locked up to six months for 5 basis points per month after the first three months for free. | | | 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 | | | Pascale's Perspective: | Fed, Cliff, Ceiling -- Let's start with today's surprising and multi-faceted Fed announcement: (1) The major question is when will the Fed end the era of "accommodating rate environment?" ie: near zero discount rates that were put in place in late 2008. Until approximately mid-2015 has been the standard consensus. Today the Fed officially invoked targets for unemployment (6.5% or below) and inflation (2.5% or above). Investors were “deer in the headlights” as they struggle to interpret the Fed-speak (ie: do they believe that the economy is not recovering quickly? Are the limits of Fed policy "tools" becoming more apparent? (2) Operation "Twist" is over as the Fed has no more short term bonds to sell, so they will be expanding the balance sheet and purchasing both long term Treasuries; ($45 billion per month) and long term mortgage back bonds ($40 billion per month). There were slight sell-offs in both Bond and Equity markets. The 10 year T sits at 1.70% (up 9 bps in 2 days). Is the recent awakening of the housing market evidence of Fed "success" as buyers take advantage of historic low mortgage rates? Look for markets to move this week as investors digest the news overnight.... ”Fiscal Cliff" I wonder if great compromises of the past (LBJ and civil rights, Reagan and Tip O'Neill on Social Security) could ever have occurred in today's white hot 24 hour political news cycle: Correspondents Twittering every minute development in the negotiations between the President and Congress. Today's micro developments saw some pessimism that the grand deal being discussed Monday and Tuesday may be less achievable and talks will drag into the post-Christmas week…. Debt Ceiling-Lack of a debt ceiling agreement, which could lead to a US sovereign default, has the capacity to roil credit markets more than the fiscal cliff fear. Will a potential "cliff" deal include a ceiling deal? Some in Congress are starting a separate bill and negotiations on a stand-alone debt ceiling agreement..... All of the uncertainty and data is weighing on investors, but there is not yet enough "fear factor" to spark a rally in Treasuries and a return to rates in the 1.50% range... ...Stay Tuned... David R. Pascale, Jr. |
|
|
|
|
©2012 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of
George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
|
|
|
|
|
|
|
|
