GSPartners
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Volume XXI | No. 41 | October 23, 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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0.17%
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5 Yr US Treasury
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1.28%
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5 Yr Swaps
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1.44%
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12-MAT
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0.14%
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3 Month LIBOR
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0.24%
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10 Yr US Treasury
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2.50%
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10 Yr Swaps
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2.65%
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11th Dist COFI
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0.96%
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6 Month LIBOR
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0.36%
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30 Yr US Treasury
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3.59%
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| | | Transaction Description: | | $70,000,000 Cash-Out Refinance of a Class-A Multifamily Apartment Complex GSP successfully placed the cash-out refinance of a Los Angeles Class A multifamily property with an off-shore commercial bank. GSP was engaged to refinance a maturing $65,000,000 construction loan with new floating rate debt, interest only loan, open to prepayment at any time. The loan is priced at 30 day Libor + 155 with no floor, currently 1.72% all-in, with limited recourse to the Sponsor. |
Challenge: Our request was to obtain financing with no cash-flow covenants (i.e. debt-yield or DSCR benchmarks) which could trigger a cash flow sweep or force the Sponsor to re-margin the balance to conform to the DSCR constraints - a common structure with many capital providers. To maintain a low mortgage constant, we sought 5-year interest-only, floating rate mortgage with no requirement to purchase an interest rate cap, collar or other interest rate derivative. |
Solution: GSP promoted the Sponsor’s financial strength, the buildings’ strong lease-up history, the Sponsor’s extensive management experience and the growing demand for multifamily rental housing in the downtown market. GSP structured a floating rate loan without cash flow covenants or an interest rate cap or swap. |
| | Rate: LIBOR+155: 1.72% | | Term: 5 Years | | Amort: Interest Only | | LTV: 65% | | Prepayment: None | | Lender Fee: 0.25% | | Advisors: Gary M. Tenzer, Bryce Overend |
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| | | Transaction Description: | | $2,550,000 Cash-Out Refinance of Southern California Apartment Community George Smith Partners arranged the cash-out refinancing of a 31 unit multi-family property in Lynwood, California. The property is 100% occupied and has a history of maintaining 95% or greater occupancy. The borrower required maximum proceeds for the acquisition of another property where all contingencies were released. Although the subject property has a non-conforming unit, GSP sourced a lender willing to lend 75% of the appraised value and close in time for the borrower to complete the new purchase. The borrower wanted to minimize rate exposure and GSP negotiated a rate lock at application, securing an interest rate of 4.21% fixed for 7 years and a step-down prepayment. |
| | Rate: 4.21% Fixed for 7 Years | | Term: 30 Years | | Amort: 30 Years | | LTV: 75% | | Prepayment: 5,4,3,2,1 Open | | Recourse | | Lender Fee: Par | | Advisors: Stephen Stein, Teddy Stutz |
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| | | Transaction Description: | | $2,800,000 Bridge Loan on a 71% Occupied Southern California Mixed-Use Asset. Shahin Yazdi placed the 70% of purchase debt for a distressed Office and Industrial property in Southern California. The five year term is priced at Prime plus 50 basis-points with a 4.25% floor, interest only for the first 18 months. The loan will then amortize over 25 years negating the need for take-out financing upon stabilization. |
Challenge: The property was 71% occupied at close and maintained a 61% historical economic occupancy. The Borrower has limited commercial real estate experience. This acquisition had a short escrow period with numerous hurdles to overcome. |
Solution: Upside potential and pro-forma garnered significant interest from the capital markets. As a prior REO, the asset was distressed over mis-mismanagement. A well-established 3rd party property management company was retained to handle daily operations and leasing. All third party reports were rushed and provided the lender with all due diligence materials presented within 72 hours of their request. |
| | Rate: Prime + 0.5% w/4.25% Floor | | Term: 5 Years | | Amort: IO for 18 Months then 25 Years | | LTC: 70% | | DCR: 1.15 | | Prepayment: None | | Recourse | | Advisor: Shahin Yazdi |
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| | | | Non-Recourse Ground-Up Construction GSP is working with a national investment bank reviewing ground-up construction requests on a non-recourse basis. Transaction requests from $30,000,000 and up are sized to 80% of cost, possibly 85% of cost by exception. A completion guarantee will be required from a qualified sponsor. Rates start in the low 6% range and priced based on risk. Core assets in major MSAs will be considered. |
| | | 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 | | | Speakers Corner | GSP Founding Principal Gary M. Tenzer will be moderating the Alternative Financing panel Thursday October 24th at the RealShare Apartments 2013 Conference. More information and registration for the downtown Los Angeles event is available here. Mr. Tenzer will also be moderating the Equity Panel at the Crocker Symposium on October 29th. Crocker event information is available on-line here. | | | Pascale’s Perspective |
Aftermath of the Debt Deal…."The End" or "To be Continued…." The 10 year Treasury has rallied from 2.75% (2 days before the deadline with no deal in sight) to 2.49% (today)…..Why? Tapering of QE3, once thought to begin in Sept/Oct 2013, is now "off the table" for 2013 after Tuesday’s disappointing employment report. The shutdown drama has multiple effects, (1) Consumer confidence and other data indicate that anxiety during the "countdown" and subsequent shutdown that started in early September weighed on consumers and employers, affecting spending and hiring decisions. (2) Many economic reports (Unemployment, capacity utilization, etc) were delayed as staffers were furloughed and the data itself may be affected, adding to the uncertainty….General consensus is that the Fed will not tighten in any way until a series of solid, reliable economic reports…..Speaking of anxiety, the next question is: Was the October drama a watershed event? Will lawmakers take steps to avoid another shutdown/debt ceiling brink as deadlines are approaching in less than 90 days? (Jan 15 shutdown, Feb 7 debt ceiling) The fallout is not insignificant (or behind us): The downgrade warning from Fitch last week is the beginning of a 2-3 month review that could result in an actual downgrade (which will not be helped by another showdown in Jan 2014), China is calling for investors to move to the renmimbi and away from the US dollar, etc. Will we go through a cycle for the next few years of drama/brink/last minute compromise as market volatility ebbs and flows and the Fed continues to expand their balance sheet to "infinity"? For now, all eyes are on the bi-partisan group scheduled to make recommendations for compromise by December 13. To paraphrase Robert Plant, "Does anybody remember compromise?" …..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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