GSPartners
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Volume XXI | No. 18 | May 8, 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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0.74%
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5 Yr Swaps
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0.90%
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12-MAT
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0.17%
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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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1.77%
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10 Yr Swaps
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1.98%
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11th Dist COFI
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0.98%
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6 Month LIBOR
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0.43%
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30 Yr US Treasury
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2.99%
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| | | Transaction Description: | | $7,735,000 Acquisition Loan for a 200 Unit, Colorado Springs Apartment Building GSP arranged the acquisition financing of a 200 unit stabilized apartment building in Colorado Springs, Colorado. The property was constructed in 1949 and had been owned and privately managed by a local family for many years. The Borrower’s goal is to close on the acquisition with long term debt and raise the NOI through capital improvements and third party management that will effectively push rents. |
Challenge: Amortization was an issue due to the age of the building. The Appraiser concluded a 35 year remaining life netting a 25 year amortization period which eroded proceeds. This market experiences seasonality in rents and the Buyer entered into the PSA during a trough, further eroding proceeds. |
Solution: GSP re-visited the amortization and, using the property condition report and the Buyer’s improvement plan, was able to support a 30 year amortization and net additional proceeds. GSP requested a 12 year term, eliminating the stress underwriting constant and increased proceeds by over $400,000. The Lender agreed to 1 Year of interest only to off-set the slightly higher interest rate impact on cash flow. This was only the second 12 year deal funded by the Lender nationwide. A relatively new product, the market for 12 year lender secured notes is establishing itself quickly. |
| | Rate: 4.39% | | Term: 12 Years | | Amort: 1 Year IO then 30 Years | | LTC: 74% | | Prepayment: Yield Maintenance | | Non-recourse | | Lender Fee: Par | | Brokers: Jonathan Lee, Shine Cheng |
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| | | Transaction Description: | | $1,295,000 Los Angeles-Multifamily Building Bridge Loan Bryan Shaffer successfully placed the acquisition debt of a 30 unit multifamily property in the Koreatown sub-market of Los Angeles. The owner plans to reposition the property and required a closing within 30 days. The loan is interest-only for 6 months before rolling into a 30 year amortization. There is no prepayment penalty. |
Challenge: Although 100% occupied, many capital providers did not embrace the Sponsor’s vision of creating additional value to a building with strong occupancy. |
Solution: GSP identified an international lender who specializes in bridge products and accepted the borrowers’ business plan and rent growth projections. The streamlined process allowed the loan to fund within 30 days of the executed purchase agreement. The lack of prepayment penalty will allow the Sponsor to seek more aggressive financing once the property is re-stabilized at a higher income level. |
| | Rate: 5.0% | | Term: 5 Years | | Amort: 6 months IO; 30 Year Amort | | LTC: 70% | | Prepayment: None | | Recourse | | Lender Fee: 1/2% | | Broker: Bryan Shaffer |
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| | | | Pacific Northwest Community Bank George Smith Partners identified a Washington State Community Bank actively funding ground-up construction, bridge/reposition and mini-perm debt in Washington, Oregon and Hawaii. Core assets plus hospitality will be considered in those markets. Multifamily bridge debt will also be underwritten for California assets to break-even debt coverage. LIBOR based loan are being funded from 3.0%; $2,000,0000 to $25,000,000 for a two-year term before options. Secondary and tertiary markets are considered. |
| | | Hot Money | Non-Recourse Bridge Debt from 3.0% George Smith Partners is placing non-recourse reposition loans at bank pricing for larger assets. The LIBOR based capital provider will fund without a repayment guarantee to 65% of current value or 75% with a warm-body repayment guarantee. Transactions from $15,000,000 to $40,000,000 are priced from 275 to 325 over 30 day LIBOR, and are not subject to a floor. Assets in the Western United States are considered with positive debt coverage in place at funding. | | | 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 | | | In The Press | Principal and Managing Director David Rifkind posted a commentary on GlobeSt.com regarding healing borrower balance sheets and lenders flush with cash. So where are the transactions? Mr. RIfkind’s observations and comments may be found here. | | | Pascale’s Perspective | Treasury Sell-Off Treasuries sold off after the 10 year yield hit a low of 1.65% last week, rising to 1.77% as of today. Why? Fears of a global slowdown have subsided based on last week’s better than expected US jobs report, and positive news from Germany and China. The 10 year Swap is almost 2.00%.... CMBS spreads are tightening as the AAA bonds are pricing at Swaps + 76 bps, down from 92 bps a couple weeks ago, so all in coupons are holding steady…. More “extreme” Central Bank behavior: The European Central Bank is not cutting rates as of now due to the German economic report, but may cut rates in the future. It looks like the ECB may try to “be like Ben” ie. purchase bonds as part of their own Quantitative Easing program…. The ECB purchases “toxic” assets from troubled southern European countries such as Italy and Spain…. The ECB may also institute a negative deposit rate, ie. charge banks that are hoarding money at the ECB, the rate presently stands at zero. This may encourage the banks to lend (loosen credit) or it may cause the banks to continue to hoard the cash and raise the rates on existing loans (tighten credit)…. The levers of monetary policy may have unintended consequences… …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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