GSPartners
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Volume XXI | No. 37 | September 25, 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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1.43%
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5 Yr Swaps
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1.60%
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12-MAT
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0.15%
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3 Month LIBOR
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0.25%
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10 Yr US Treasury
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2.66%
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10 Yr Swaps
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2.81%
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11th Dist COFI
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0.95%
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6 Month LIBOR
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0.38%
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30 Yr US Treasury
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3.67%
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| | | Transaction Description: | | $14,000,000 Cash-Out Refinance of a San Diego Hotel GSP successfully placed the cash-out refinance of a 136-key flagged San Diego hotel. The 65% LTV permanent loan included a $6,000,000 return of equity to the Sponsor. This asset services both business and leisure travelers, and is the top performing hotel in its comparable set. The seven-year term is fixed at 4.75%, and amortizes over 25 years. The loan closed in under 40 business days from application, and in a tumultuous interest-rate environment. The Sponsor received a free rate lock at application that was held until close. |
Challenge: With significant rate movement during the since Bernanke’s June speech, the Sponsor’s initial CMBS refinance fell through the week of closing due to skyrocketing rates and widening spreads. Indices similarly jumped during the processing of the replacement loan. |
Solution: GSP quickly re-entered the capital markets upon cancellation of the CMBS transaction; sourcing and negotiating favorable portfolio financing which included a free rate lock to hedge against fluctuating rates. Though rates did continue their upsurge during due diligence, the lender honored the rate lock and closed without any deviation from the executed term sheet. |
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| | | Transaction Description: | | Single-Tenant Acquisition for a Northern California Industrial Condo Shahin Yazdi placed the 65% of purchase debt for a single tenant industrial condo in Hayward, California. The property is an investor acquisition and not an owner-user asset. The seven year term is fixed for five years at 4.00%, amortized over 25 years. Proceeds were maximized to a 1.35 debt coverage ratio on actual leased income. |
Challenge: The borrower’s global debt to income cash flow fell below most lender guidelines. The tenant only had 5 years remaining on their lease. |
Solution: The borrower’s liquidity mitigated a majority of the credit issues. Post-close income generated from the subject property improved the global cash flow. The tenant had operated from this location for over 10 years and had just completed $100,000 in Tenant Improvements. |
| | Rate: 4.0% Fixed for 5 Years: P+0.5% | | Term: 7 Years | | Amort: 25 Years | | LTV: 65% | | DCR: 1.35 | | Prepayment: 5,4,3,2,1 open | | Recourse | | Advisor: Shahin Yazdi |
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| | | | California Regional Bank Funding sub-1.0 DCR George Smith Partners is originating construction and reposition debt with a Regional Bank funding in California, Washington and selective cities in other Western States. Some level of recourse will be required with burn-off at stabilization. All core assets and assisted living from $5,000,0000 to $25,000,000 is underwritten for experienced developers. Pricing @ L+300 is designed to allow for additional credit risk. Loan-to-cost will top out at 70%. |
| | | Hot Money | New Market Tax Credits GSP is funding transactions with a West Coast Capital provider who was recently awarded with a New Market Tax Credit allocation. They will invest an additional $34,000,000 on non-residential large-scale, job-creating projects in western states by year-end 2013. This Department of Treasury program is designed to provide federal tax benefits for low-income and distressed community investments. Equity investments are made in ventures that create jobs or serve the public. To date, this fund has invested in a City Hospital and culinary training school. | | | 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 | Treasuries and Spreads Rally….. ”Taper Talk” has calmed down considerably, as economic reports (Consumer Confidence for example) remain tepid. Fed Governor Dudley shed some light as he said that there are two tests that he is looking for, 1) Labor market improvement. This shows the Fed is aware of statistical and anecdotal data that the “employment recovery” has issues with underemployment and 2) The economy needs to have enough “forward momentum” to believe improvements will continue. The Fed will need a series of positive economic reports; this may be a tall order. The 10 year Treasury hit a 6 week low at 2.65% today, 36 bps below the recent high of 3.01%. CMBS and other credit spreads are also rallying as AAA bonds neared the Swaps + 100 bps range (note that this spread has been as high as 140 in recent months), with full leverage 10 year loans now pricing at “just under or just over 5.00%” depending on transaction. I respectfully dedicate this week’s column to my cousin Frankie and my friend Marshall……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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