GSPartners
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Volume XXI | No. 29 | July 31, 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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1.38%
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5 Yr Swaps
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1.55%
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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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2.58%
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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: | | $20,000,000 Assignment of Purchase Contract in Investment Sale GSP has successfully sourced the purchaser for a fully entitled multifamily site in North San Diego County. Originally engaged to place the construction debt & equity, GSP identified an institutional investor during its marketing efforts with an offer to purchase the entitled land. Using their development expertise, GSP’s Client rezoned the industrial land for transit-oriented, multifamily development in 2012. The 400-unit development site is adjacent to a light rail station providing direct access to all of North San Diego County. GSP secured the off-market offer allowing for the Sponsor to profit approximately 50% of their promoted development earnings.
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| | | Transaction Description: | | Permanent Northern California Unentitled Land Loan GSP’s Ameet Chagan placed a permanent loan with a private lender secured by 6.25 acres of unentitled and unimproved land in Northern California. The fixed rate loan self-amortizes over 20 years with no prepayment penalty after the fourth year. |
Challenge: The subject property is located in a tertiary market and the borrower’s original bank land loan was sold to a private investor. The note had ballooned and despite the borrower’s strong banking relationships, no bank would facilitate a land loan without an exit strategy involving development within one year. Hard money financing would be expensive and carry an annual balloon risk, an event the Sponsor was anxious to avoid. |
Solution: GSP identified a private lender willing to underwrite the property’s highway visibility and proximity to big box retail centers. GSP demonstrated to the borrowers’ strong credit and financial strength, allowing the lender to qualify the low risk of default. The loan was structured as a fully self-amortizing loan to avoid all balloon risk and allow sufficient time to carry out the development plan as the market recovered. |
| | Rate: 8.25% Fixed | | Term: 20 Years | | Amort: 20 Years | | Prepayment: 4,4,4,4, open | | Recourse | | Lender Fee: 0.5% | | Advisor: Ameet Chagan |
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| | | | “Keep it Simple” JV Equity George Smith Partners is originating Joint Venture equity relationships with a West Coast discretionary fund looking to “keep it simple” in order to execute additional transactions by year-end. Rehab/reposition transactions are preferred although non-multifamily ground-up will be underwritten as well. Retail is high on the “needs” list. Equity is structured with a 90/10 co-invest for up to a five year hold period as they desire a multiple over an IRR. Equity slugs will be from $10,000,000 up. |
| | | Hot Money | 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. | | | 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 | Founding George Smith Partner, Steven Bram was recently published in GlobeSt.com regarding his dealings with post-recession credit issues. Mr. Bram's observations, feedback and advice is available on-line. | | | Pascale’s Perspective | Today’s Fed announcement: The Fed opted for a “non-event” statement with the highlight being the description of recent US economic growth as “modest” compared to “moderate” (signal for a reluctance to taper bond purchases too soon?)….. The 10 year Treasury rose to 2.58% (up about 7 bps) today. The Fed is non-committal on setting a date for tapering, preferring to watch economic reports. Therefore, this Friday’s unemployment report may move markets significantly. September may be a significant month. Why? 1) A successor to Bernanke may be named, the markets are already parsing the histories of main candidates Janet Yellen and Laryy Summers (the consensus seems to be Yellen is a bigger fan of QE); 2) German elections—Germany is the defacto “paymaster” of Europe re: bailouts and support for fragile southern European economies, a big change could bring back the “Euro fear factor”; 3) September may see the beginning of tapering bond purchases (some say December is more likely)….. Correction to last week’s column: The Fed Funds rate is the rate that banks lend to other banks. The discount rate is the rate that the Fed lends to the money center banks. Note that these rates are very close and interrelated. Thank you to the 2 readers that pointed this out. ….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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