GSPartners
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Volume XXI | No. 25 | July 2, 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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1.38%
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5 Yr Swaps
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1.56%
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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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2.47%
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10 Yr Swaps
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2.70%
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11th Dist COFI
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0.95%
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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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3.48%
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| | | Transaction Description: | | $5,619,400 Quick Close Loan on a 382 Unit, Class C Houston Multifamily Project Bryan Shaffer successfully placed the acquisition/reposition debt for a distressed 382 unit Multifamily property that was 40% occupied at funding. The loan closed within 7 days from when the lender received this loan request. The non-recourse loan to an international Borrower was sized to 70% of purchase plus 100% of “good-news” dollars to $3,000,000. |
Challenge: Funding a severely distressed building with break-even cash flow in a 7 day window presented a significant challenge. The “off-shore” structure of the Borrower added an additional level of complexity. |
Solution: Leveraging our long-term relationships and experience with an international Borrower, GSP was able to quickly identify the correct lender and close the transaction within the 7 day-deadline. Mr. Shaffer customized an ownership structure to allow for the release of the construction funds within the timeframes of the buyer. |
| | Rate: 11% | | Term: 18 Months | | LTC: 70% + $3M rehab | | Non-recourse | | Advisor: Bryan Shaffer |
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| | | Transaction Description: | | Cash-Out Refinance of Single Tenant Restaurant GSP successfully placed the cash-out loan refinance of a local restaurant to 65% of value. The investment property is leased to a local operator who does not credit enhance the lease. The new loan retired existing debt, paid off unrelated and unsecured payables and provided a substantive cash cushion to the sponsor. |
Challenge: The single tenant is considered special use with only this one location. The Sponsor has historic credit issues with limited liquidity. |
Solution: The lender became comfortable with the tenant by demonstrating the long term stability and historical operations of the restaurant. The business has been at this location for 20+ years and sales have recently been on the rise. GSP structured all invoices paid through escrow. The Borrower initiated a depository relationship with the local capital provider. |
| | Rate: 4.75% | | Term: 10 Years | | Amort: 25 Years | | LTV: 65% | | DCR: 1.35 | | Prepayment: 5, 4, 3, 2, 1, open | | Recourse | | Lender Fee: 0.50% | | Advisor: Jason Gaffner |
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| | | | SoCal Portfolio Lender Re-enters the Construction Market A prominent Southern California capital provider with a clean balance sheet has re-entered the ground-up construction market. Requests to $10,000,000 will be considered for core assets plus a wide array of special purpose uses including GSA leases, restaurants/fast-food, auto-repair, childcare & flagged hotels for investors or owner/users. The recourse loans are available state-wide and rates are loan specific. Bridge and mini-perm programs for these same products are also available for well supported borrowers. |
| | | Hot Money | Ground-Up Construction Healthcare Mezz-Debt George Smith Partners identified an International Mezzanine Debt fund currently funding mezzanine debt for the construction of several skilled nursing facilities and an acute care property in the US. Other healthcare related uses considered include Assisted Living, Memory Care and Hospitals. Transactions will size from $5,000,000 to $50,000,000 per project with single-digit pricing to 90% of cost. A tri-party agreement with the senior lender will be required for this non-recourse mezz-debt. Commitments are obtained as fast as 45 days and funding 30 days thereafter. | | | 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 | | | Prepayment Penalties | In general, commercial real estate lenders hate to get paid off, particularly when their loan is performing. When there is a repayment, the lenders have to figure out how to reinvest the money. One way lenders deal with this problem is by building a lock-out mechanism into their loans, adding a prohibition of prepayment of the loan for a specific period of time. The prepayment penalty is designed to insulate the lender from losing out on the benefits of the yield being generated by the loan that is being prepaid. This is done through a vehicle called Yield Maintenance (YM) and is used largely by both banks and life insurance companies. Each lender has its own version of how it calculates YM, but they essentially are looking for the Net Present Value of the stream of loan payments or profit margin that they would have received had the loan not been repaid. This calculation is usually fairly complex. A variation on the YM mechanism is the “Step Down Formula” in which a very simple formula that allows the Borrower to calculate his prepayment penalty without any uncertainties relating to discount rates or other variables. This “Step Down Formula” often looks like “5% in Year 1, 4% in Year 3, 3% in Year 3, etc.”. The last form of prepayment penalty is known as Defeasance and is most frequently found with CMBS aka “conduit” or “Wall Street” loans. The goal with Defeasance is to allow the CMBS bondholders to continue to receive the stream of cash flows they bargained for without any interruption, even if the loan is repaid before maturity. Defeasance involves purchasing government treasury bonds or other government agency securities in an amount that will duplicate the cash flow streams the CMBS bondholders are receiving. Those securities are used as collateral instead of the real estate which is released as part of the loan repayment. Eric Hamermesh | | | Pascale's Perspective | Fixed Income Markets Calming....Rates Stabilizing...... The 10 year-T has settled in at 2.50%. The last few days have been free of volatility..... CMBS spread widening has abated slightly. Some originators and market watchers feel the market may have overreacted and are closely watching the next few pools for signs of a rally. Agency (Fannie/Freddie) coupons have taken a double hit as Treasuries and MBS assets are selling off, new full leverage loans are pricing in the low 5’s. New commercial fixed rate 10-year debt is also pricing in the 5.10% to 5.25% range. The recent selloff in bond assets was huge; over $80 billion poured out of bond mutual funds and ETF’s in June. Investors buy bonds for stability as an “anchor” against the volatility of stock markets. As the 3rd quarter of 2013 begins, investors will be reviewing their 2nd quarter statements over the next week and deciding what to do next. As the Fed intervention into the markets (QE1,2, etc) was unprecedented, the exit and/or perception that the exit is near is uncharted territory. Recent weeks have seen Fed governors (Dudley most vocally) calm markets by indicating that the Fed bond buying may go on longer, nothing is “set in stone”. It was interesting to see the head of the Chinese central bank speak of increasing liquidity and short term rates and calm global markets recently. A sign of things to come? …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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