FINfacts Newsletter XXI-20

Volume XXI  |  No. 20  |  May 22, 2013   Letter to the Editor KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.20% 5 Yr US Treasury  0.90% 5 Yr Swaps  1.06% 12-MAT  0.17% 3 Month LIBOR  0.27% 10 Yr US Treasury  2.05% 10 Yr Swaps  2.17% 11th Dist COFI  0.97% 6 Month LIBOR  0.42% 30 Yr US Treasury  3.24%     Transactions of the Week Transaction Description: Discounted Pay Off w/Replacement 1st Trust Deed to 88% of the New Basis Bryan Shaffer successfully structured a discounted pay off on a 38,000 square foot distressed office/flex building in the High Desert of Southern California. The project market was greatly impacted by the economic downturn. GSP also arraigned the replacement debt to 88% of the new basis. The five year loan amortizes over 30 years and carries a step-down prepayment. Challenge: Our client purchased this asset for over twice the discounted note payoff amount in what ultimately became one of the worst commercial real estate markets in California. No recent sales comparables exist within this market. Occupancy and cash flow are currently positive, but there is substantial roll-over risk in a highly vacant commercial market. Solution: GSP utilized a non-bank replacement lender to meet the requirements of this reposition. The new lender became comfortable with the Sponsors’ operations of the subject to date and his capacity to manage the asset in a depressed market. The restated basis and additional cash equity in addition to the substantial Borrower cash investment made to date further provided comfort to the Lender that this Sponsor will carry the asset until the market re-stabilizes. Rate: 7.50% Term: 5 Years Amort: 30 Years LTC: 88% Prepayment: 3,2,1, open Recourse Broker: Bryan Shaffer Transaction Description: $1,560,000 Non-Recourse Acquisition a Multi-Family Brick Building Shahin Yazdi placed the 65% of purchase debt for a 32 unit multifamily asset. The brick building is located in the mid-Wilshire district of Los Angeles. The non-recourse loan is fixed for five years at 3.725% and offers three years of interest only. The lender did not require an earthquake risk assessment on the brick asset. Challenge: The Borrower requested non-recourse debt, not typically available for brick assets in California. A deed restriction on title required several units to be rented to low income residents on a reduced basis. The below market rent significantly impacted the net cash flow at funding. Solution: The Lender accepted additional cash to purchase in order to mitigate the repayment guarantee on the brick building. The strong asset location also served as an enticement to proceed on a non-recourse basis. The deed restriction expires in 2 years and will result in a spike to the NOI. A three year interest only component was structured to take advantage of future cash flow. Rate: 3.725% fixed for 5 Years Term: 15 Years Amort: 3 Years IO then 27 Years LTC: 65% DCR: 1.30 Prepayment: 3,2,1 open Non-recourse Broker: Shahin Yazdi Hot Money SoCal Construction/Bridge/Mini-perm for Core Products George Smith Partners has identified a Southern California Commercial Bank actively seeking ground-up construction transactions for all core asset classes. Transactions are funded to 65% of cost limited to a $20,000,000 transaction ceiling. Product types include multifamily; for-rent, for-sale and student housing, retail, office and industrial. Other programs are also offered for more stable assets or bridge/reposition properties at or below break-even coverage. Hot Money Five Year CMBS execution with Reduced Prepayment Wall Street is actively expanding their platform and structures to attract a higher production volume. GSP is receiving qualified terms from one CMBS originator quoting five year fixed rate, amortized over 30 years down to a 9% debt yield for commercial, sub-9% for multifamily. The loan will open to prepayment without penalty for the last two years for a 30 basis-point increase in spread. A three year zero-prepayment can be structured for an additional 60 basis point premium. Five year transactions are currently priced at 3.75% before the pre-payment premium add-on. 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 ©2013 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.