GSPartners
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Volume XXI | No. 5 | February 6, 2013
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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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0.20%
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5 Yr US Treasury
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0.84%
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5 Yr Swaps
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1.00%
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12-MAT
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0.18%
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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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1.96%
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10 Yr Swaps
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2.06%
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11th Dist COFI
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1.07%
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6 Month LIBOR
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0.47%
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30 Yr US Treasury
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3.18%
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| | | Transaction Description: | $185,000,000 Four-Property Southern California Retail Portfolio:
George Smith Partners, Inc. arranged the seven-year, non-recourse senior financing for this four-property retail portfolio. This financing enabled our Client to
satisfy all debts including the senior and mezzanine debt, cover defeasance costs and lock in a long-term fixed rate on these core properties. The Borrower requested “custom” financing including: (1) Four separate un-crossed loans; (2) Lowest possible rate;
(3) Portfolio lender; (4) Partial Interest Only; (5) Extended early rate lock to allow additional defeasance burn-down; (6) Future Institutional mezzanine financing. Three of the four properties offer grocery anchors, and the remaining unanchored center contains
an office component with restaurants. The unanchored center is supported by compelling market dynamics and consistent 97% occupancy. Two of the properties have potential lease reposition elements due to expiring tenants. The Lender was comfortable conforming
to all of the Borrower loan structure requests due to the Borrower’s local expertise, proven experience, back-office infrastructure and regional Borrower-owned property management headquarters. GSP arraigned the acquisition debt for these assets when purchased
in 2003-2004.
Property #1 ($70,600,000): Grocery Anchored; 375,000 s.f.; 39 tenants, built in late 1960’s with 1992 rehab; 3 main buildings and 11 pads in a linear configuration. Located in Northern Orange County.
Property #2 ($32,000,000): Grocery Anchored; 187,000 s.f.; 29 tenants, built in early 1980’s with anchor expansion in 2002, 4 buildings in U shape with 2 pads. Located in Southern Los Angeles County.
Property #3 ($40,200,000): Community retail center (with some office); 181,000 s.f.; 46 tenants located next to mega-mall anchored by sporting goods store. Includes “restaurant row” serving residents and local office submarket.
Located in South Bay (LA County)
Property #4 ($42,200,000): Grocery/Drug Anchored; 218,000 s.f.; 44 tenants, Built in 2003, Mediterranean style architecture, some office component, very small portion of collateral is on ground lease. Located in Ventura County.
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| | Rate: 3.85% | | Term: 7 Years | | Amort: IO for 2 Years, then 30 Years | | LTV: 65% | | DCR: 1.40 | | Non-recourse | | Lender Fee: 0.5% | Not cross-collateralized Brokers: Steve Bram, David R. Pascale, Jr. |
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| | | Transaction Description: | | $2,150,000 Recapitalization of Well Located Los Angeles Apartments GSP arranged the refinance of a 5-unit apartment complex located adjacent to Beverly Hills. The loan sized for $430,000 per unit. The property is a Class A condo-mapped rental property that is well appointed and very well maintained. The high quality of the property and its prime location allows Management to achieve rents at a very high dollar per foot. |
Challenge: The loan request was in excess of most lenders limit of loan dollars per unit. The cash-out requirement amplified the dollar per unit conflict. The Borrowers’ rent per foot ran the risk of underwriters writing down actual collections. Recent unit turn-over only provided 6 months of collection seasoning. |
Solution: GSP sourced a long-standing correspondent relationship and was able to demonstrate to the lender, a history of the property being maintained in excellent condition. The Borrower experience allowed the bank to use the seasoned income at funding, and underwrite to a lower debt coverage ratio from the initial LOI in order maximize loan proceeds. |
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| | | | Joint Venture Equity from $2,000,000 George Smith Partners has identified a transactional Joint Venture Equity firm willing to execute on smaller capitalized opportunities. Equity contributions from $2,000,000 to $10,000,000 will be considered up to 95% of the total capital stack. The co-invest will vary depending on the transaction and relative size of the request. Ground-up construction will be considered on a case-by-case basis. Secondary markets are a preference. IRR thresholds will most probably require a sale upon completion of the business plan. |
| | | Hot Money | California Construction to $30,000,000 More and more banks are re-entering the construction market, demonstrating a new confidence in our economy and an expanding capacity to put deposit funds to work. GSP is working with a California Regional Bank reviewing ground-up construction request for core assets state wide. Hospitality will be considered on a very select basis for in-fill locations. Requests will range from $1,000,000 to $30,000,000 sized to 65% of cost priced at Prime + 1%. All non-multifamily assets will require significant pre-leasing. | | | 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. | | | Report from Mortgage Bankers Conference | The National 2013 CREF Conference wrapped in San Diego this week. The event was well attended, the mood very upbeat, and the theme seemed to be “Dealmaking in the 2.0 Cycle”. Many lenders remarked “2012 was a great year and we are raising production goals for 2013”. The challenge: finding transactions that work. Look for the “strike zone to expand” ie more diverse product types (Hotels, Self Storage, Mobile Home Parks, etc) and secondary markets. Underwriting: Cash flow analysis will mirror 2012 (no pushing limits) although “Who hasn’t had a blemish in the last five years” answers the question on credit – as long as they acted responsibly. Leverage: “One Step Beyond” as some lenders look to push LTV’s between 75-80% on grocery anchored retail, Class A industrial and other highly desirable transactions. Mezz and Pref Equity: Pushing leverage to 85% with sufficient cash flow. Some institutional lenders are now quoting mezz on construction loans. Construction: Not just for apartments this year, but lenders will still be selective and require pre-leasing. Condos: Not a “bad word” anymore as liquidity returns for “busted condo” transactions at a good basis and some high yield lenders selectively funding ground-up construction (banks generally not there yet). Bridge Lenders/Funds: Non-recourse rates coming down. Banks: Competing for good transactions and thereby good customers but still looking for the repayment guarantee. Equity: Ample funds for value-add and ground-up, but not the manpower to manage so larger is better with $5,000,000 components being the exception to the $8,000,000 to $10,000,000 minimum. David R. Pascale, Jr. David Stepanchak |
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©2013 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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