FINfacts XXI-46

GSPartners

Volume XXI | No. 46 | December 4, 2013

KEY RATE INDICES
Prime Rate	3.25%	1 Month LIBOR	0.16%	5 Yr US Treasury	1.44%	5 Yr Swaps	1.53%
12-MAT	0.13%	3 Month LIBOR	0.24%	10 Yr US Treasury	2.83%	10 Yr Swaps	2.90%
11th Dist COFI	0.96%	6 Month LIBOR	0.34%	30 Yr US Treasury	3.90%

Transactions of the Week

Transaction Description:

$18,900,000 No Cash Out Refinance of Single Tenant Net Leased Property George Smith Partners successfully placed the $18,900,000 rate and term refinance of a 200,000 square foot non-medical administrative building entirely occupied by the University of Wisconsin Medical Foundation. The asset is well located in close proximity to the University of Wisconsin and other facilities supported by the tenant. The property is a four-story office building constructed specifically for the tenant in 2007, comprised of 160,000 square feet of office space and 40,000 square feet of storage, situated on a 10-acre lot. The non-recourse loan is fixed for 8 years at 4.65% before adjusting to then market rates.

Challenge: When GSP accepted this assignment, the residual term of the lease was only 7 years for the single tenant user. The shortness of the remaining lease term was unattractive to a majority of lenders in light of the Borrower’s request for a 10-year term. Ownership is structured as a 74 member LLP with no owner holding more than 4% of the shares.

Solution: GSP identified a lender experienced in designing loans for single-tenant properties with similar ownership structure. The lease term was amended slightly to add sufficient term for guaranteed rental income during the 10 year term of the loan.

Rate: 4.65% Fixed for 8 Years then Floats

Term: 10 Years

Amort: 20 Years

LTV: 70%

Prepayment: Yield Maintenance for 8 Years

Non-recourse

Advisors: Stephen Stein, Teddy Stutz

Transaction Description:

$4,700,000 Equity Financing for the Ground-up Development of a 45-Unit Southern California Apartment Building GSP successfully arranged $4,700,000 of Joint Venture equity for the ground-up construction of a 45-unit fully entitled transit-oriented apartment development in a prime Southern California infill location.

Challenge: The three sponsor principles are each highly experienced individuals, however this development is the first in a newly formed partnership entity; the venture has no track record.

Solution: GSP approached a wide market of capital sources to identify a strategic programmatic equity partner. GSP worked with the investor to develop a structure with an initial low double digit cumulative preferred return, followed by a single hurdle waterfall, and finally provide the sponsor with 70% of the upside over a 17% IRR. This structure will protect investor downside risk while providing the Sponsors with greater upside potential.

Advisors: Gary E. Mozer, Katie H. Rodd, Michael Anderson-Mitterling

Transaction Description:

$4,500,000 Cash-Out Refinance of a Multi-Tenant Industrial Park GSP successfully secured a regional bank to refinance a 94% occupied, 102,000 square foot industrial center located in a tertiary section of San Bernardino County. The ten year term is fixed for five years at 4.75% before floating over LIBOR plus 285 basis points. There is no pre-payment penalty. The loan was constrained by a 1.25 DCR and 75% LTV.

Challenge: Many national lenders are not familiar with the High Desert and shun this market due to the available raw land for future development. Due to a lack of industrial sales in this market, there was concern as to the appraised value for the subject. The sponsor also required a flexible prepay as a sale of the property within the next few years is a possibility.

Solution: GSP targeted local lenders familiar with the region and identified a capital source comfortable with this outlying market. GSP negotiated a favorable interest rate with no prepayment penalty and worked with the appraiser to insure the asset value reflected its high quality and rental demand while not penalized for location.

Rate: 4.75% Fixed for 5 Years; L+2.85%

Term: 10 Years

Amort: 25 Years

LTV: 75%

Prepayment: None

Recourse

Advisor: Jason Gaffner

Hot Money

Affordable Housing Two Year Forward GSP is working with a national debt fund for forward commitments rate locked today, funded up to 24 months on Affordable Housing rentals. Transactions from $1,000,0000 to $10,000,000 are locked at 6.38% today for an 18 Year fixed term (includes all premium costs), amortized over 30 years for funding in late 2014 or anytime through December 2015. The non-recourse debt requires a 2 point deposit but does not command margin calls should rates dip. This program is ideal for current 4% or 9% tax credit construction/rehab transactions – sized to 85% of proforma value.

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

Managing Director Steve Bram was recently published in GlobeSt.com with his comments on The Fastest Way to the Finish Line. “Honesty with the lender, in all respects, is the best way to get a deal done”. The entire article is available on-line.

FINfacts Newsletter XXI-46

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