GSPartners
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Volume XXI | No. 34 | September 4, 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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0.18%
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5 Yr US Treasury
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1.74%
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5 Yr Swaps
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1.89%
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12-MAT
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0.15%
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3 Month LIBOR
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0.26%
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10 Yr US Treasury
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2.90%
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10 Yr Swaps
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3.08%
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11th Dist COFI
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0.95%
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6 Month LIBOR
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0.39%
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30 Yr US Treasury
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3.80%
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| | | Transaction Description: | | $6,000,000 Non-Recourse Industrial Refinance in a Secondary Market GSP successfully placed a $6,000,000 no-cash-out refinance of a 100% occupied multi-tenant industrial property in Carpinteria. The non-recourse loan is fixed @ 4.65% for 10 years, amortized over 30 years. |
Challenge: Prior to obtaining our loan commitment, the secondary financial markets erupted with significant index and spread volatility. The 10 year treasury increased about 70 basis points in conjunction with spreads gapping out. The borrower was not facing a loan event risk nor was pulling cash out, thus this transaction was driven by the all-in rate. |
Solution: As GSP is in the market daily, we were able to monitor credit spread movement and keep the borrower abreast of all re-pricing issues. At the time of rate lock (index plus spread), the lender maintained his originally quoted credit spread at 1.95%, which at the time of the lock, was 50 basis points inside the market. To quote the lender; “we are doing this to maintain the relationship with GSP”. |
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| | | Transaction Description: | | House of Worship Acquisition Loan Shahin Yazdi placed the 50% of purchase debt for the acquisition of a Los Angeles area church. Unlike most religious asset finances, the purchaser is not the operator, rather an investor who leases the subject to the end user. The seven year term is fixed for five years a 4.75% and amortizes over 25 years. The loan will then float the remaining two years of the term. Proceeds were leveraged 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 property is a special use asset that is leased to a church, which is not a tenant profile that most lenders will consider. |
Solution: Mr. Yazdi focused on borrower’s significant liquidity in addition to the leased income generated from the subject property. The Church has several locations and has strong financials. The low loan to cost with fresh cash equity convinced the capital provider of this transactions’ viability. |
| | Rate: 4.75% 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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| | | | Hospitality PIPs and FF&E GSP identified a national capital provider funding Property Improvement Programs and Furniture, Fixtures & Equipment to upgrade flagged hotels to 100% of cost. All flags will be considered. The recourse loan is collateralized by a pledge of partnership interest. 2nd year proforma cash flow is underwritten to an “all-in” 1.25 debt coverage ratio on a 7 year self-liquidating loan. The loan may be interest only the 1st year until the upgrades are in place. Loans from $500,000 to $5,000,000 are fixed at 8%. |
| | | Hot Money | Multi with pre-pay issues? GSP is working with a national capital provider offering up to 6 month early rate-locks for multifamily assets. The entire coupon (not just the index or spread) is fixed at or shortly after application with a two-point deposit. Deposit funds are returned at close. The lender will allow up to a 5% forgiveness of proceeds at funding without breakage costs should the final underwriting not support the entire locked amount. Up to 25 basis points will be added to the spread for the forward, providing an inexpensive hedge against market movement as witnessed over the last two months. The program allows for stabilized properties to lock today’s rates while pre-payment penalties on the current capital stack burn off. Underwritten transactions from $5,000,000 and up will qualify. | | | 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 | Tapering Treasuries…. Today’s Beige Book language from the Fed was sanguine enough to convince markets that the long discussed “Tapering” is upon us. The 10 year T has been net selling for 3 straight days, yields rising to 2.90% today. Bill Gross tweeted that tapering is “nearly a sure thing”, markets will watch tomorrow and Friday’s employment and industrial reports very closely. Unless there is some dramatically negative news, tapering is a surety. The most likely scenario is a reduction in Treasury buying (down $10 billion to $35 billion) and no change in Mortgage Backed Security buying (holding at $40 billion). How the Fed communicates (ie “forward guidance”) this process may be as important as the actual numbers…. Once tapering starts and the communication begins, will the markets accelerate selling, driving up rates? Or could it be the reverse of the old stock market adage “buy the rumor, sell the news”, except this time it could be “sell the rumor, buy the news”? ....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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