FINfacts XXI-39

GSPartners

Volume XXI | No. 39 | October 9, 2013

KEY RATE INDICES
Prime Rate	3.25%	1 Month LIBOR	0.18%	5 Yr US Treasury	1.42%	5 Yr Swaps	1.58%
12-MAT	0.14%	3 Month LIBOR	0.25%	10 Yr US Treasury	2.66%	10 Yr Swaps	2.81%
11th Dist COFI	0.96%	6 Month LIBOR	0.37%	30 Yr US Treasury	3.74%

Transactions of the Week

Transaction Description:

$5,816,000 Refinance of an Unanchored Retail Center in a Secondary Market George Smith Partners successfully placed the $5,816,000 refinance of a 44,498 square foot unanchored multi-tenant strip center in Palmdale, California. The property is well located in an established retail corridor, within close proximity to a recently constructed regional medical center. The 10 year term is fixed at 4.50% for 7 years before rolling to a floater. There is no prepayment during the term of the loan.

Challenge: Palmdale has been one of the last markets to recover from the economic downturn. Retail leasing in this market is challenging with average vacancy above 20% for most retail centers. Several lenders quoted 50% loan-to-value or less. The existing loan was coming due and the borrower was unwilling to re-margin the loan.

Solution: GSP identified a community bank that had never originated a loan in Palmdale but accepted GSPs analysis of the strength of this location and expertise of the borrower. The Sponsor maintained +90% occupancy at this site since acquisition in 2007. GSP demonstrated the viability of the local sub-market, the competency of the Sponsor and the positive attributes of this asset that contributed to its high occupancy over the last 7 years. A term sheet to 73% of “As-Is” value was negotiated that did not require any additional equity from the borrower.

Rate: 4.50% Fixed for 7 Years

Term: 10 YEars

Amort: 30 Years

LTV: 73%

Prepayment: None

Recourse

Advisors: Stephen Stein, Teddy Stutz

Transaction Description:

$4,400,000 Refinance of a Special Use Retail Center Ameet Chagan placed the $4,400,000 refinance of a 22,480 square foot neighborhood retail center in Southern California. The rate was locked at application fixed for 7 years at 4.625% on a 25 year amortization. The mixed-use tenancy included a church as well as more traditional in-line tenants.

Challenge: The subject property’s largest tenant is a church on a month-to-month lease. Property owner lacked sufficient liquidity and net worth for most institutional capital providers. The Sponsor was rate sensitive and required a portfolio lender with flexibility in servicing the loan.

Solution: GSP identified a portfolio lender that understood the subject property’s market and potential reposition of the church space to retail use if the lease does not renew. GSP highlighted the superior historical cash flow of the asset and underscored the guarantor as a second generation owner; representing 30 years of sponsorship. By identifying a lending source whose rate is not directly tied to the U.S. Treasury, the borrower was unaffected by the rapid spike in Treasury rates just prior to application.

Rate: 4.625%

Term: 7 Years

Amort: 25 Years

LTV: 65%

Prepayment: 5, 3, 1

Recourse

Lender Fee: 0.5%

Advisor: Ameet Chagan

Transaction Description:

Acquisition Loan for Two Vacant Mid-West Retail Assets Shahin Yazdi placed the 60% of purchase debt for two - 24,000 square foot vacant retail properties that were newly constructed, but empty shells, requiring tenant improvements for leasing. No interest reserve or TI reserves were required for funding. While vacant properties are difficult to finance, the borrower’s strength and market experience with this asset type, as well as the asset quality and superior location provided comfort to the lender for this execution. The Prime based floating rate loan is floored at 4.75% and does not require a pre-payment penalty.

Rate: 4.75%

Term: 5 Years

Amort: IO for 18 months then 20 Year Amort

LTC: 60%

Prepayment: None

Recourse

Advisor: Shahin Yazdi

Hot Money

Pacific Northwest Portfolio Lender GSP has identified a portfolio lender funding bridge/reposition and ground-up construction from the Bay Area (San Francisco) north to the US/Canadian border. Mini-perm and perm transactions are also underwritten for non-core assets including churches and special purpose real estate on an “As Is” basis. Transactions from $5,000,000 to $20,000,000 are considered for construction to perm requests. Loans are asset driven and can be funded for out-of-area borrowers.

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 Washington The Government Shutdown-Debt Ceiling drama seems to be overshadowing today’s nomination of Janet Yellin to succeed Bernanke at Fed Chairperson. Yellin is seen as “dovish” by bond markets, more likely to continue ultra-accommodative monetary policy and/or slower to pull back. Debt Ceiling: There is still some consensus that a solution will occur “just in time”, although it will probably be short term, with negotiations to follow, perhaps another try at the elusive “grand bargain” on long term budgetary matters. However, the rate on the 1 month T-bill doubled this week (from 0.13% to 0.28%), while longer term treasuries actually rallied as the uncertainty created a flight to quality (ironic and paradoxical). The lack of buyers for short term paper indicate some fear that some debt ceiling breach may occur and November redemptions would be affected. If this drags on into late next week, investors may start pulling money out of short term money markets, which are the “lubricant” for credit markets worldwide. Serious consequences may occur not from the technical act of breaching the debt ceiling, but by market perceptions and fear. ….stay tuned….. David R. Pascale, Jr.

FINfacts Newsletter XXI-39

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