GSPartners
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Volume XXII | No. 2 | January 15, 2014
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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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0.16%
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5 Yr US Treasury
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1.67%
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5 Yr Swaps
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1.77%
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12-MAT
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0.13%
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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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2.88%
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10 Yr Swaps
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2.99%
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11th Dist COFI
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0.78%
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6 Month LIBOR
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0.34%
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30 Yr US Treasury
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3.81%
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| | | Transaction Description: | | $23,000,000 Refinance for 111 Room Unflagged Leasehold Hotel with Step-Down Prepayment George Smith Partners arranged a life company portfolio loan for a boutique waterfront Los Angeles hotel. The fee position is leased from the County of Los Angeles with 49 years remaining. The 10-year fixed rate non-recourse loan features: (1) 5,4,3,2,1 prepayment during years 6-10 of the loan term; (2) No cash management; (3) Non-recourse carve-outs limited to an entity; (4) Interest Only for the first two years of the term. The Sponsors have owned the property for over 15 years and performed a major renovation in 2010 which included new construction doubling the room count. The hotel features a 200 seat indoor/outdoor, well-regarded restaurant and bar with above average F&B income. Amenities include: valet parking, pool and hot tub, ocean views from 50% of the rooms, fitness facility and meeting rooms. Although the hotel is not flagged, it benefits from a major chain style reservation system run by the sponsors, who self-manage this hotel along with 25 other well located hotels. |
| | Rate: 5.45% | | Term: 10 Years | | Amort: 30 Years after 2 Years IO | | LTV: 63% | | Prepayment: 5 Years Locked then 5,4,3,2,1 | | Non-recourse | | Lender Fee: .375 | | Advisors: Steve Bram, David R. Pascale, Jr. |
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| | | Transaction Description: | | $3,000,000 Cash-Out Refinance Non-Recourse R&D to a Non-US Citizen George Smith Partner Successfully placed the $3,000,000 refinance of a commercial asset that was previously free & clear, i.e. all proceeds represented a return of equity to the Borrower. The non-recourse permanent loan is collateralized by a negative cash flowing, single tenant R&D building in Pasadena. Fixed at 4.75% for five years and amortized over 25 years, the loan opens to prepayment after the 3rd year. A banking relationship was not required. |
Challenge: The Borrower, a foreign investment group with an 18 month track record in the States, sought to recapitalize their 100% cash purchase of the property and could not offer a repayment guarantee. The officers of the company have residency, but no citizenship. The tenant has no credit and has not demonstrated positive income for the last 14 years. |
Solution: GSP identified a capital provider who understood the value in the real estate and strong location. The lender documented the increasing income of the tenant and verified the tenants’ forecast for positive cash flow in near future. The tenant had also recently garnered national attention as they are featured in numerous articles for their achievements and successes. |
| | Rate: 4.75% | | Term: 5 Years | | Amort: 25 Years | | Prepayment: 3, 2, 1, open | | Non-recourse | | Lender Fee: 1.0% | | Advisors: Salar Royaei, Gilda Rivera |
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| | | Transaction Description: | | Cash-Out Refinance on land and Community Center GSP successfully placed the cash-out refinance collateralized by an encumbered parcel of land and a community center in Ventura, California. The community center is divided into several art studios and includes a designated space for classes and community gatherings. The land is zoned industrial and does offer positive cash flow with revenue generated from leases to several tenants that use the lot for equipment storage. Our Sponsor is a Family Trust where only one member owning 25% was willing to guarantee the loan. Most lenders require more than 50% of the ownership to sign on the loan. GSP overcame these issues by focusing on the property’s strong cash flow and low Loan to Value. The 5.0% coupon is fixed for 5 years before rolling to Prime plus .25%. Prepayment steps down from 4,3,2,1, open years 5, 6, and 7. |
| | Rate: 5.0% | | Term: 7 Years | | Amort: 25 Years | | LTV: 55% | | DCR: 1.30 | | Prepayment: 4, 3, 2, 1, open | | Lender Fee: 0.5% | | Advisor: Shahin Yazdi |
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| | | | High Leverage Non-Recourse Construction Debt “For Sale” Product George Smith Partners identified a debt fund that has recently expanded their product program to include non-recourse ground-up construction to 85% of project cost on “For Sale” product. Condos, townhomes, stick builts will be underwritten from $5,000,000 to $35,000,000 for up to three years. Coupons from 7% to 8% plus a 1 point origination + 1 point exit fee are funded with a completion and carve-out guarantee only. The find will not accept entitlement risk or land flipping. |
| | | 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 Managing Director Steve Bram will be participating on the California Capital Summit 2014 Outlook panel hosted by Manatt, Phelps & Phillips in their West Los Angeles office. The January 17th breakfast panel begins at 7am. More information and registration is available on-line. | | | In The Press | Founding Partner Gary M. Tenzer was interviewed for the January 8th edition of GlobeSt.com on the influence debt yield has on structured debt. The conversation was centered on the commercial loans maturing over the next three years. The entire article is available on-line. | | | Pascale's Perspective | Treasury Volatility, Unemployment Target: A very disappointing jobs report last week sent Treasury yields dropping as investors bet that the Fed will slow down on tapering. The 10 year dropped from 3.00% to 2.82%. Today it stands at 2.90% with the 10 year Swap at 3.00% on fed governor comments indicating that tapering is on the right track. A more interesting development: the low job growth was accompanied by another drop in labor participation, which now stands at 62.8%, the lowest in 40 years. This “denominator effect” lowered the Unemployment Rate to 6.7%, its’ lowest rate in years. The Fed guidance for raising the key fed funds rate has been 6.5% unemployment. The Fed Funds rate directly affects Bank Prime Rate, heavily influences LIBOR and fixed rates tied to swaps. This rate has been at historic near zero lows since 2008. In their statement announcing the tapering last month, the Fed was quick to soothe nervous investors by issuing forward guidance that it is prepared to delay raising the rate until “well beyond” achieving 6.5% Unemployment Rate. The benchmark was intended to be a milestone at “a normal economy” but issues such as large numbers of long term unemployed, “mismatching” of labor force skills and available jobs, and decline in participation are now either a long term aberration or the new normal. The Fed may issue new forward guidance on the Unemployment Rate (dropping the threshold to 6.0% or even 5.5%) with the consensus that the raise will occur in late 2015 or early 2016. Keep in mind that the consensus in 2011-2012 was for a rise in 2014. …..stay tuned….. David R. Pascale, Jr. |
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©2014 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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