GSPartners
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Volume XXI | No. 15 | April 17, 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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0.69%
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5 Yr Swaps
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0.86%
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12-MAT
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0.18%
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3 Month LIBOR
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0.28%
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10 Yr US Treasury
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1.70%
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10 Yr Swaps
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1.87%
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11th Dist COFI
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1.00%
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6 Month LIBOR
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0.44%
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30 Yr US Treasury
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2.88%
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| | | Transaction Description: | | $3,400,000: SRO/Multifamily Project in Downtown Los Angeles to a REIT + 35 Torrance Units to a Private Investor Bryan Shaffer placed two Single Resident Occupancy (SRO) transactions to two separate investors. The downtown Los Angeles/Skid Row project is a 198 unit SRO built in 1924, owned and managed by a public REIT. The Torrance asset is a mixed-use SRO with ground floor retail/restaurant space. Both acquisitions were sized and priced similarly to 75% of purchase, fixed for 7 Years at 6.5%, amortized over 30 Years. |
Challenge: In addition to the marginal locations, SRO usage presents a challenge for most lenders as they are not traditional housing units in that kitchens and bathrooms are shared. Similar to a dormitory in configuration, many are rented with daily and weekly uses like a hotel. Income is subject to wild swings due to the short term rentals. |
Solution: Sponsors requested that we examine both market rate and affordable options to finance these assets to maximize a high probability of close due to the unusual product type and low-quality locations. GSP identified a mission-driven portfolio lender who understands SRO uses their valuable housing options for low income tenancy who cannot afford housing on a more traditional level. GSP secured 75% loan to value financing and worked with the Sponsor to develop a viable long term operational plan for these asset. |
| | Rate: 6.50% Fixed | | Term: 7 Years | | Amort: 30 Years | | LTC: 75% | | Prepayment: 3,2,1 open | | Recourse | | Lender Fee: 1.5% | | Broker: Bryan Shaffer |
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| | | Transaction Description: | | $1,230,000 Cash-Out Refinance of a Playa Del Rey Multifamily to 75% LTV GSP successfully arranged the $1,230,000 cash-out refinance of a Playa Del Rey multifamily. The loan is fixed for 7 years before floating at 2.25% + 6 Month LIBOR for the remaining 30 year term. There is no balloon risk and the pre-payment penalty drops to zero after the 4th year. |
Challenge: The Borrower requested maximum proceeds, typically limited to 65% to 70% of value when pulling equity out. The relative small size of the asset reduced interest from many of the more traditionally aggressively priced capital sources. |
Solution: GSP highlighted the location of the collateral, and provided the Lender with comparable values to further warrant the higher 75% LTV with the cash-out request. Future debt opportunities with this Sponsor and his strong real estate track record justified the sub-4.0% pricing despite the property’s size and substantial return of equity. |
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| | | | SoCal Construction/Reposition to $6,000,000 GSP is working with a Southern California Community Bank actively funding ground-up construction and major reposition assets from $1,000,000 to $6,000,000. They can work through moving pieces and special use assets including hospitality, tract & spec housing. Loan requests from Santa Barbara to San Diego including the Inland Empire will be underwritten at Prime + 1.5%. This portfolio lender does not carry any legacy paper and operates with a flat decision making process. |
| | | Hot Money | Hospitality: Debt, Mezzanine Debt, JV Equity George Smith Partners is actively placing the entire capital stack on existing hotel/hospitality transactions with a single capital provider on a national basis. Bridge/reposition and perm debt is available under this program from $15,000,000 and up to 75% LTC/LTV. Transactions that cover to a 1.0 DCR or better are funded without a repayment guarantee. Sub-10% debt yields are funded on business projections with a 12% debt yield exit. DPOs/story deals are welcome. Most flags are considered with Hilton and Marriott favored. Mezz-debt and joint venture equity requests are underwritten to quality experienced Borrowers from $5,000,000. Ground-up construction is not currently being considered by this $1.4 billion fund. | | | 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 | "Fear Factor" is Back As terrorism concerns (Boston, ricin letters), historic gold volatility, major bank and tech company earnings below expectations all contribute to stock sell off and lower Treasury yields. The 10 year was as low as 1.66% this week, now at 1.70%. Gold: There were some major short sellers that contributed to the price drop. This may be a sign that investors feel that low inflation could be the norm for a while in addition to low interest rates. Spotlight on Central Banks: The Bank of Japan's recent major stimulus announcement ($1.4 trillion injected into Japan economy over the next 2 years with an inflation target of 2% for 2015) follows the US Fed's continued quantitative easing. This week's major slide in commodity prices highlights the fear of the central banks, which is deflation. The primary intent of the central banks is to stimulate economies, specifically employment. This month's disappointing US employment report highlights the inability of the Fed to "reach" the critical group, the "long term unemployed" that are still out of jobs and leaving the job market in large numbers. The Fed strategy is working to stimulate the housing market (markets actually temporarily rallied Tuesday on housing numbers). Unemployment is a structural issue that perhaps no amount of "pushing the levers at the Fed" can cure. The Fed can't ignite the next great entrepreneurial innovation or industry that hopefully can inspire new hiring. ...stay tuned... David R. Pascale, Jr. |
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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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