GSPartners
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Volume XXI | No. 15 | April 16, 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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0.15%
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5 Yr US Treasury
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1.65%
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5 Yr Swaps
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1.77%
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12-MAT
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0.12%
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3 Month LIBOR
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0.23%
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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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2.76%
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11th Dist COFI
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0.71%
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6 Month LIBOR
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0.33%
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30 Yr US Treasury
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3.45%
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| | | Transaction Description: | | $5,600,000 DPO and Construction Facility for New Mexico Residential Land Development George Smith Partners placed a land acquisition and infrastructure construction loan secured by 165 acres of a master planned community in Albuquerque, New Mexico. The collateral allows for over 1,100 apartment units, almost 600 single family residences, plus some commercial development. The Sponsor will develop residential lots and sell them to national and regional homebuilders. Financing included an initial funding to repay the existing lender and other expenses plus a secondary facility to fund future construction of residential lots and infrastructure. The two year term was limited to 65% of current value but was 87% of the actual acquisition price. Financing also allows for a full interest reserve and funding of 65% of new construction costs going forward. Fixed at 12.5%, the loan carries a 30 day interest prepayment penalty. |
Challenge: Financing this project offered several challenges. Since the last real estate cycle, unimproved residential land has fallen out of favor because it is a non-cash flowing asset and takes considerable time to monetize, posing considerable risk to a lender. Next, the Sponsor was involved with complex negotiations for a discounted payoff to the existing lender and restructuring payments to bondholders. Finally, Albuquerque is considered a tertiary market and, therefore, it is not a popular target location for many lenders and investors. Together, these challenges presented a formidable task to sourcing a financing partner. |
Solution: GSP immediately commenced on a targeted marketing effort to well-suited financial partners and sourced a capital provider who was not only knowledgeable about the location and marketplace, but also comfortable with 1) the investor’s expertise consisting of 35 years of land development and homebuilding experience including more than 20 years in Albuquerque; 2) a land basis that was the lowest in the marketplace; 3) level of guarantee (full recourse); and 4) a business plan that included already executed homebuilder contracts for residential lot purchases. GSP vetted the risk exposure upfront with the new capital provider and worked to structure objective criteria to satisfy the Sponsor and Lender. |
| | Rate: 12.5% | | Term: 24 Monthsw/extension | | Amort: Interest Only | | LTV: 65% | | Prepayment: 30 Days of Interest | | Recourse | | Lender Fee: 3 Points | | Advisor: Loren Bedolla |
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| | | Transaction Description: | | Single Tenant-Net Leased Cash-Out Refis George Smith Partners arranged the cash-out refinance of two single-tenant properties located in Colorado and North Carolina. Although both are occupied by the same national auto parts supply company, the two loans for the same Borrower stand alone and are not crossed. The North Carolina asset was recently purchased with only a few years remaining on the lease. Our Sponsor was successful in negotiating a new long-term lease with the tenant prior to funding. GSP identified an institutional portfolio lender that is executing similar business plans and gave credit for the immediate increase in the capitalized value in allowing for the return of equity. |
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| | | Transaction Description: | | $1,837,500 75% LTC Acquisition for a Southern California Brick Building Building Shahin Yazdi successfully placed the 75% of cost acquisition of a 33 unit brick multifamily building in the Mid-Wilshire district of Los Angeles. The rate was fixed for 5 years at 4.225% before floating at 2.25% over the 6 month LIBOR. The non-recourse loan also has 3 Years of interest only before it amortizes over 30 years. |
| | Rate: 4.225% Fixed for 5 Years; LIBOR + 2.25% | | Term: 10 Years | | Amort: 3 Years IO then 30 Years | | LTV: 75% | | Non-recourse | | Advisor: Shahin Yazdi |
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| | | | Ground-Up California Construction: Multifamily, Condo and Commercial A regional bank is actively funding California construction projects including “For Sale” housing; stick-built tract and high-rise condos to $40,000,000. Commercial assets including hospitality will also be funded at lower LTC points. Housing Rentals top the list at 75% of cost with retail, office and industrial topping out at 70%. Condos and flagged hotels are limited to 65% of cost. LIBOR based spreads of 300 over serves as the baseline prior to credit adjustments. Imputed equity is considered for land holds over 2 years or entitlement changes while owned. Take-out and traditional mini-perm options are also available for recourse 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 | | | NNN Property Financing – Part 2 of 3 | Once an acceptable STNL (single-tenant net leased) property is identified, the landscape of lenders is varied. Candidates for STNL loans include banks, insurance companies, CMBS and credit unions. Cap rates on STNL offerings represent the seller’s opinion of the risk-adjusted return (usually in their favor) a buyer should accept. Knowing the right lender and available loan terms for a particular STNL investment before an offer is made is critical and can help strengthen a buyer’s negotiating position. Typically, lenders will offer 5, 7 or 10-year term loans but the fixed interest rate period could depend on a variety of factors. Floating rate debt 3-year term loans may be available and could be ideal if a borrower’s hold period is 3 years or less. As of this writing, floating rates can be as low as 2.75% with fixed rates ranging from 3-years at 3.50% to 10-years at 4.75% for credited tenants. Additional loan terms available for net-leased assets as will be covered in next week’s FINfacts. Stephen Stein |
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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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