GSPartners
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Volume XXI | No. 27 | July 24, 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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1.37%
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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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2.59%
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10 Yr Swaps
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2.78%
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11th Dist COFI
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0.95%
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6 Month LIBOR
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0.40%
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30 Yr US Treasury
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3.64%
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| | | Transaction Description: | | $10,100,000 Cash-Out Refinance of a Lake Tahoe Specialty Retail & Marina GSP placed the cash-out refinance of a specialty retail center located on the south shore of Lake Tahoe, California. The 18,000 square foot property was acquired in 2002 and includes 300 feet of lake frontage, a man-made harbor and a 300 foot pier. The 10 Year loan is non-recourse and priced at 5.89%, amortized over 30 Years. Proceeds were tied to a 9.5% debt yield on this special use asset. |
Challenge: Beyond the challenges associated with the inherent seasonality of the property’s performance and the high loan psf ($562/sf), the State Land Commission’s permit, authorizing the property’s access to the water was cancelable upon change in ownership; an impossibility for any lender. Several of the center’s largest water oriented tenants lacked the proper insurance coverage required by most lenders. |
Solution: GSP promoted the property’s strong operating history and the rarity of having 300 square feet of lake frontage near a downtown corridor. These factors contributed to the lenders comfort with both the seasonality and the high loan psf. GSP worked with the lender and the borrower’s legal counsel to restructure the state permit with the California State Lands Commission. GSP negotiated with both the borrower’s and lender’s insurance consultants to resolve coverage issues. |
| | Rate: 5.89% | | Term: 10 Years | | Amort: 30 Years | | LTV: 72% | | DCR: 1.40 | | Prepayment: Defeasance | | Non-recourse | | Lender Fee: Par | | Advisors: Gary M. Tenzer, Bryce Overend |
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| | | Transaction Description: | | $1,722,500 Acquisition Loan on a Single-Tenant/Special Use Investment Asset Shahin Yazdi placed the 65% of purchase debt for a single tenant restaurant in Pasadena, California. The purchaser is not an operator but an investor seeking to leverage their return with a low cost of fixed rate debt. The seven year term is fixed for five years a 4.50% and amortizes over 25 years. Proceeds were maximized to a 1.20 debt coverage ratio on actual leased income. |
Challenge: The borrower’s global debt to income cash flow fell below most lender guidelines. The tenant showed a loss from operations the last two years. |
Solution: GSP focused on borrower’s significant liquidity as well as the income generated from the subject property. The tenant provided a supportable projected income model that will return operations to profitability. |
| | Rate: 4.50% Fixed for 5 Years | | Term: 7 Years | | Amort: 25 Years | | LTV: 65% | | DCR: 1.20 | | Prepayment: 3,2,1, open | | Recourse | | Advisor: Shahin Yazdi |
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| | | | National Small Balance Portfolio Fixed Rate Debt to $6,000,000 George Smith Partners is originating fixed rate permanent loans with a non-Wall Street execution from $2,000,000 to $6,000,000. This national capital provider is funding core assets to 75% of value on a non-recourse basis. Pricing is risk based but sized over US Treasuries, typically 20 basis points inside of SWAPs. Loans are amortized over 30 years. |
| | | Hot Money | National Bridge Lender to $10,000,000 George Smith Partners is currently underwriting several reposition transactions with a capital source new to the national market. The non-recourse loans are priced from 6.5% to 8.0% based on the risk, from $1,000,000 to $10,000,000. Story transactions are welcomed as well as marginal credit history. Core assets are underwritten to a +8% debt yield on the exit. An interest reserve may be funded for loans under a breakeven 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 | | | Pascale’s Perspective | Focus on Floating Rate Indices….. Fixed rate volatility has been in the forefront recently while floating rates have remained stable. LIBOR and Prime rates remain at historic lows. 30 day LIBOR has been very close to 0.20% since mid-2009. Both LIBOR and Prime are tied to the Fed Funds rate, the rate the Fed charges to lend to money center banks. That rate was cut to virtually zero in early 2009 and has not been raised. Note that the Prime rate is directly tied to Fed Funds while LIBOR “mirrors” the rate as LIBOR is intended to be an interbank offering rate. Recall that in the pre-2008 “old normal” economy, the Fed’s primary tool was the discount rate which it used to change periodically (in 2004-2006 it changed about 5 times per year). Now, that rate has been unchanged for 4 years, with the Fed indicating the next raise will not be until early 2015. Extra accommodative policies such as bond buying (QE3) are now in place in addition to the ultra low discount rate. The Fed will not raise the discount rate until their often discussed thresholds (6.5% unemployment or 2.0% inflation) need to be reached before another raise in the discount rate. LIBOR’s methodology and benchmark status is in jeopardy with recent scandals over LIBOR manipulation. Administration of LIBOR has recently been shifted to NYSE Euronext from the British Bankers Association (founder of LIBOR). Various agencies are exploring LIBOR reform. Commodity groups are concerned that a derivative market (NYSE) is running the index, some are asking for it to be replaced with a transactional reference rate. But as LIBOR is the basis of $750 trillion in transactions, the various agencies and regulators do not want to potentially roil markets by making any rapid transitions. ….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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