GSPartners
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Volume XXI | No. 43 | November 6, 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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1.34%
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5 Yr Swaps
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1.47%
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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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2.64%
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10 Yr Swaps
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2.78%
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11th Dist COFI
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0.96%
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6 Month LIBOR
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0.35%
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30 Yr US Treasury
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3.77%
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| | | Transaction Description: | | $15,628,000 Non-Recourse Cash-Out Refinance of 103 Unit West Los Angeles Apartment Portfolio George Smith Partners placed the non-recourse $15,628,000 cash-out refinance of 5 apartment properties in West Los Angeles. The loans were sized to 65% loan-to-value and are fixed for 7 years at 3.95% with 5 years of interest-only payments. They will amortize over a 30-year schedule thereafter. The five separate loans are not crossed collateralized or cross defaulted. |
Challenge: The loan request was highly structured and the five separate ownerships required five loans that could not be crossed or pledged to other entities. Interest-only and non-recourse components are challenging to obtain for cash-out refinances. The borrowers have a sophisticated ownership entity structure that required extensive documentation. Several limited members of the partnership owned a significant percentage of the equity interest, but preferred not to execute non-recourse carve-outs. |
Solution: The aggregated size of the loan requests afforded the opportunity to structure five identical but separate stand-alone transactions. George Smith Partners highlighted the financial quality of the managing members along with the prime locations of the properties to mitigate the return of equity, delayed amortization concerns and obtain a below market interest rate. The Sponsors’ resume also allowed us to negotiate the carve-out guarantee structure. |
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| | | Transaction Description: | | Cash Out Refinance of a Southern California Retail Center Shahin Yazdi placed the $2,400,000 permanent loan on a strip retail center near Downtown Los Angeles. This request represented a substantial return of equity to the Borrower. The ten year loan is fixed for seven years at 4.15% before adjusting to LIBOR plus 1.80% with an option to fix the coupon at the then market rate. Although all leases expire over the next five years, tenant roll-over risk was mitigated by demonstrating that 35% of the occupants have operated at this location for 15 years or more. |
| | Rate: 4.15% Fixed for 7 Years | | Term: 10 Years | | Amort: 25 Years | | DCR: 1.40 | | Prepayment: 4,3,2,1 open | | Advisor: Shahin Yazdi |
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| | | Transaction Description: | | $1,500,000 Cash-Out Refinance for a 9 unit West Hollywood Multifamily Building GSP successfully placed the refinance of a small multifamily asset with a local lender that netted a large return of equity to the Borrower. The nine-unit building is owned by an out-of-state Sponsor. The cash out loan is fixed for 5 years at 4.62% before rolling into a floating rate loan for the remaining 25 years of the term. |
Challenge: The Sponsor had experienced the foreclosure of two rental homes in the last three years. As a retired real estate professional, the guarantors’ global cash flow was severely limited and he carried considerable personal debt. |
Solution: GSP demonstrated the strong income generated from the subject property to a lender who became comfortable with the leverage and invested the time to review the no-fault credit issues. The Borrower owned the subject property for 20+years and no credit issues prior to the recent downturn. Historical gross income increased annually on the rent controlled asset. All personal debt obligations were retired through this refinance, improving personal global cash flow. |
| | Rate: 4.62% Fixed for 5 Years | | Term: 30 Years | | Amort: 30 Years | | LTV: 65% | | Prepayment: 5,4,3,2,1 open | | Recourse | | Lender Fee: Par | | Advisors: Jonathan Lee, Shine Cheng |
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| | | | National Non-Recourse Bridge Debt to 85% of Value George Smith Partners is actively funding bridge/reposition transactions for core assets from $10,000,000 on a nationwide basis. The non-recourse loans are sized to 1.0 debt coverage, 85% of value and an “As Is” 6% debt yield. Priced at LIBOR + 4.75, coupons carry a 5.50% floor. Interest reserves may be funded for a below break-even coverage by exception. This capital provider freely admits they are not the least expensive bridge provider but their real estate ownership affords them to underwrite with a larger focus on the collateral rather than the non-recourse guarantor, and deliver a higher execution as applied for. |
| | | 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 | Measuring Success – Is bank underwriting really close to pre-crash levels? Commercial Property Executive Magazine recently polled several commercial real estate pros including GSP’s Gary M. Tenzer for their feedback. The article may be found on page 40 of their November issue. | | | Pascale’s Perspective | Treasuries drift up, CMBS rallies…. Treasury yields rose to 2.64% (up from a low of 2.48% two weeks ago) as investors are parsing the latest Fed statement and comments from some Fed Governors. They feel that the economy is moving along in the right direction and there is some concern about the size of the Fed’s balance sheet (however, Bullard noted that the Fed balance sheet is not as large as Japan, Europe and the UK when measured in relation to GDP)…. The market feels that tapering will begin in March-April 2014, but sustained positive economic news could push that date up to January. Monthly employment reports (tomorrow is a release) will be closely watched and may cause volatility in yields. Meanwhile, CMBS spreads are rallying slightly as AAA spreads have narrowed under the key level of Swaps + 100. Full leverage CMBS and Life company coupons can still be found just under 5.00%. ...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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