GSPartners
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Volume XXI | No. 21 | June 5, 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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0.19%
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5 Yr US Treasury
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1.02%
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5 Yr Swaps
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1.21%
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12-MAT
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0.16%
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3 Month LIBOR
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0.27%
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10 Yr US Treasury
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2.09%
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10 Yr Swaps
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2.28%
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11th Dist COFI
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0.97%
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6 Month LIBOR
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0.41%
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30 Yr US Treasury
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3.24%
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| | | Transaction Description: | | $11,800,000 Non-Recourse Construction Loan for a 63 Unit For-Sale Los Angeles Townhome Development GSP arranged the financing for the ground-up development of 63 “For-Sale” townhomes in the Silver Lake neighborhood of Los Angeles. The property was purchased all cash by a joint venture between an established local developer and an equity fund. The acquisition of the vacant property included full entitlements and a ready-to-pull grading permit. The construction drawings were finalized post-close. The non-recourse construction loan was sized to 50% of total project cost. |
Challenge: Neither of the joint venture partners were able to guarantee the construction loan or offer a “warm body” for the completion guarantee. The developer had yet to re-establish a building track record since the beginning of the recession in 2007. |
Solution: GSP identified a lender that understood the cache of Silver Lake and the demonstrated demand created by the local public schools and their impact on home prices. GSP negotiated a completion guaranty exclusively from the equity fund and limited the completion guarantee to the entity level. To mitigate cost over-run concerns, GSP had the Borrower establish a dedicated cash account with an initial funding of 8% of the loan amount. The funds are available for cost overruns and will be released at certificate of occupancy. |
| | Rate: 5.25% | | Term: 2 Years + a 6 Month Extension | | Amort: Interest Only | | LTC: 50% | | Non-recourse | | Brokers: Jonathan Lee, Shine Cheng |
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| | | Transaction Description: | | $4,500,000, 75% LTV Non-Recourse Cash-Out Refinance of 156 Units in Brunswick, Georgia George Smith Partners successfully placed the non-recourse cash-out refinance of a 156-unit apartment property in Brunswick Georgia. The loan is fixed for 10 years at 4.61%, amortized over 30 years. |
Challenge: The subject property is located in a municipality of 15,000, much smaller than most lenders’ minimum population guidelines. Most capital providers are not comfortable with borrowers requesting a significant return of equity to 75% leverage. The property is located in a national flood zone, just several feet above sea level. This dramatically increased insurance requirements with the majority of lenders. This is the only investment property the California Borrower owns; he has no other interests in this Georgia market. |
Solution: GSP demonstrated the strong historical cash flows, 10-year historical operating success, and healthy demand demographics for the small city of Brunswick. While the sponsor agreed to increase the property’s hazard insurance coverage, the lender waived the requirement of excess flood coverage for loss of rents, significantly reducing the cost of coverage. GSP highlighted the sponsor’s track record with past real estate investments and his personal financial strength to mitigate concerns about his ability to manage the asset three time zones away. |
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| | | | Five-Year Fixed, Non-Recourse with Open Pre-Pay GSP identified a national institutional funder of stabilized assets (core + hospitality) lending to 75% of value on a fixed rate basis for a five year term. The 30 year amortized lender requires standard call protection for the first three years but is open to prepayment the last two years without penalty. Rates vary based on risk but approximate 3.75% to 3.90% today. There is no lender origination fee for transactions over $10,000,000. |
| | | 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. | | | 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 | GSP Principal Malcolm Davies was recently interviewed by Commercial Property Executive magazine on the current status of the Commercial Real Estate Finance Market. The Q&A interview begins on page 27 of the on-line magazine. | | | In The Press | Founding Partner Gary E. Mozer published an article in Multi Housing News on the proliferation of joint venture opportunities. The article begins on page 39 of the on-line magazine. | | | Speakers Corner | Founding Principal Gary M. Tenzer will be moderating the finance panel at the RealShare Investment & Finance convention Tuesday June 18th. The two-day event will be held at the Westin Gaslamp Quarter in San Diego starting on Monday the 17th. registration information is available here. | | | Pascale's Perspective | “Taper Swoon” in the bond market……. Massive sell off, yields spike as investors try to parse recent indications from the Fed that it may slow down the $85 billion monthly bond purchases. The 10 year T spiked from 1.75 (May 3) to a high of 2.21% last week. Today it stands at 2.10% as the Treasury rallied on poor economic data. Often times in the “new normal” era, bad economic news triggers a rally in markets that have become “addicted” to extraordinary Fed stimulus such as QE3. Bad news = continuing stimulus. Note that the sell off was not triggered by any actual slowing of bond purchases, just on speculation that bond purchases may be tapered in a few months. The sequence of the removal of Fed stimulus will most likely be (1) Less bond purchases; (2) No bond purchases; (3) Selling of bonds; (4) Raising of the discount rate. Is this the beginning of the “training wheels coming off”? Will the market effects be gradual or chaotic? Remember, this is uncharted territory with no historical precedent…. For now, investors will be closely watching Friday’s employment numbers, Fed meeting June 18-19 (and Bernanke’s press conference) along with other “tea leaves” ……..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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