GSPartners
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Volume XXI | No. 22 | June 12, 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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1.14%
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5 Yr Swaps
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1.35%
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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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2.23%
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10 Yr Swaps
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2.43%
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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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3.37%
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| | | Transaction Description: | | $52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds George Smith Partners placed the $52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds for Phase I of a 310 acre master development project in Upper Marlboro, Prince George County, Maryland. Upon completion, the build out will encompass 533,000 sf of retail, 845 “for sale” SFRs & town homes, 2,240,000 sf.of office, 600 key hotels (multiple flags) and 884 multifamily rental units. The financing provided was for Phase I of the development, which consists of the entire infrastructure to deliver 500,000 sf of retail, 348 town homes, 504 rental units and a 150-key hotel. The raw land was initially purchased in February 2012 for $23,700,000. |
Challenge: The foreign based international development company has been extremely active in acquiring land in the United States during the past 5 years from their Canadian HQ. Collectively, they have acquired over 50,000+ acres in Arizona, Texas, Georgia, North Carolina, DC Region and Southern California. While they have been active in developing their land holdings in Canada since 1979, this was their first large financing request in the U.S. (The company owns all of their land un-levered). To add further complexity, the ownership structure in this asset included a Canadian Public Company and a German entity, which owned the asset as a TIC Structure. This precluded the sponsor from using a pledge of membership interest for the mezzanine financing. Sponsorship also had an important deadline to start the development. Negotiating the inter-creditor was paramount in a successful closing of the capital stack between the senior & mezzanine lenders. Prince George County has some of the most difficult performance bonding requirements in the country. |
Solution: GSP immediately embarked on a strategic and national in scope process of marketing that included face-to-face meetings in Boston, New York, Maryland, Virginia, DC, Texas, Arizona & California. The project included many moving parts involving articulating the strengths in multiple disciplines; valuation in retail, single family, hospitality, multifamily rentals, office & residual tract land. Combining this articulation and blanketing the country, GSP was able to secure senior debt from a Texas based bank that understood land development and was excited about the prospects for future development opportunities with this sponsor. GSP then structured the mezzanine loan from a New York based hedge fund making its first investment in commercial real estate. By focusing on market education in structuring and collateral, we were able to successfully complete a complicated inter-creditor agreement and funding by the mezzanine loan. Securing the mezzanine loan as a 2nd trust deed, we were able to provide the mezzanine lender it's security, rather than by the standard pledge of membership interest. By adding a portion of the bonding capacity from the lender, the Sponsor was able to reduce the overall costs to secure the performance bonds for the project. The Grand Opening of the project is Thursday, June 13th. |
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| | | Transaction Description: | | $4,400,000 Cash-Out Refinance of a Multi-tenant West Los Angeles Office Building GSP successfully placed the $4,400,000 non-recourse loan on a 20,403 square foot multi-tenant office building in West Los Angeles. The loan provided a return of equity on the Class B asset on a non-recourse basis. The 10-year term amortizes over 30 years after the 3rd year of interest only. |
Challenge: Maximizing the return of equity and ongoing cash flow to the sponsor is best achieved through a CMBS execution. The loan request was below the $5,000,000 minimum threshold for most Wall Street capital providers. The collateral consists of numerous non-credit tenants with relatively short leases and high rollover. The subject is located on a secondary street. |
Solution: Our strong lender relationships allowed us to achieve large deal terms on a small, sub-$5,000,000 transaction. Despite being below the lending institution’s minimum loan size threshold, the deal was closed by an investment bank with aggressive pricing. The strength of the Sponsor added to the appeal of the transaction and mitigated excessive roll-over structuring and the secondary location. |
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| | | | Nationwide Ground-Up Construction. GSP identified a national institutional funder providing ground-up construction of core property types to 75% of cost. Transactions will range from $5,000,000 to $45,000,000 for up to a five year term. Mini-perm options are typically available upon stabilization. Rates vary based on risk but are floored at 4.0%. Non-recourse with a completion guarantee is available on a limited basis based on product type, location and borrower strength. |
| | | Pascale's Perspective | Treasuries, CMBS…… Is this the end of the “Bernanke put”? Fixed Income Markets are experiencing some asset deflation leading to rising yields. Today’s 10 year Treasury auction of $21 billion attracted the lowest demand since last August, with the 10 year yield sitting at 2.23%. This week it ranged from 2.15% to 2.29%. Obviously the Fed’s QE3 program caused asset inflation across the board, bonds and equities. CMBS spreads widened as well. Remember that CMBS bond buyers are buying a 10 year coupon. As Treasury yields rise, the coupon may be worth less next week/month/year on a mark to market basis. Life company spreads are starting to widen slightly but coupons are now much tighter than CMBS as most life companies’ price over the actual Treasury, not the swap. This week will see some important reports (Retail Sales, PPI, Industrial Production, Capacity Utilization) that investors will read for clues, all leading up to next Wednesday’s highly anticipated Fed statement and press conference. ...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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