GSPartners
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Volume XXI | No. 16 | April 23, 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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1.73%
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5 Yr Swaps
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1.85%
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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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2.71%
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10 Yr Swaps
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2.81%
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11th Dist COFI
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0.71%
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6 Month LIBOR
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0.32%
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30 Yr US Treasury
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3.47%
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| | | Transaction Description: | | $8,412,492 Rate and Term Refinance of Multi-Tenant Walgreens Anchored Retail Strip Center George Smith Partners successfully arranged refinancing of a 36,882 square foot multi-tenant strip center anchored by Walgreens in La Palma, California. The property is located on a high traffic signalized corner and was completely occupied at funding. Fixed at 4.7% for seven years, the 63% leveraged portfolio loan self-amortizes over 25 years and offers a step-down prepayment. |
Challenge: The Walgreens lease contains a bifurcated income stream including a development reimbursement for construction of the building that ceases after 25 years, making the income stream difficult to underwrite for lenders and appraisers. Our application structured an interest rate based on a 55% loan-to-value. |
Solution: Mr. Stein identified a sophisticated lender familiar with similar rent structures and understood how to value property based on this diminishing cash flow stream. Although the appraisal supported a 63% loan-to-value, the lender agreed not to modify the interest rate as a result of the property’s strong operating history, location and the sponsorship of the loan. |
| | Rate: 4.70% Fixed for 7 Years | | Term: 25 Years | | Amort: 25 Years | | LTV: 63% | | Prepayment: 5,4,3,2,1 open | | Recourse | | Adviosrs: Stephen Stein, Teddy Stutz |
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| | | Transaction Description: | | $3,250,000 Cash-Out Owner/User Refinance in West Los Angeles Shahin Yazdi successfully placed a 100% cash-out refinance loan on an owner-user property that was previously Free & Clear. The two operating companies occupying the property were reporting a negative cash flow. The 10 Year term is fixed for 5 Years at 4.75% before floating over Prime. |
Challenge: Owner-User loans require the operating companies show a profit. In this case, the owner of the property owned both businesses that are in occupancy and both reported huge losses. One 50% owner refused any level of guarantee. The remaining guarantor received the majority of his income from a gentleman’s club he owns and operates. |
Solution: The capital provider relied on the financial strength of the remaining guarantor (specifically his liquidity) and the quality and strong location of the collateral in order to obtain comfort in securing the moderate leveraged debt
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| | Rate: 4.75% Fixed for 5 Years; Prime+0.5% | | Term: 10 Years | | Amort: 25 Years | | LTV: 65% | | Recourse | | Advisor: Shahin Yazdi |
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| | | Transaction Description: | | $2,200,000 Multi-Tenant Retail Refinance George Smith Partners successfully placed the 65% loan to value for the refinance of an in-line retail center. The subject property in a Michigan college town was 80% occupied predominantly by regional credit tenants. Several leases are month-to-month with the balance rolling during the initial 5 year term. Vacancy results from relatively poor visibility from the street for several of the units. High-traffic counts added comfort to the capital provider despite the short term leases and month-to-month tenants. Historically high net cash flow and a low loan per square foot appealed to the portfolio Lender as well. The recourse loan self-liquidates over a 25- year term; fixed for the first five years at 5.0%. |
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| | | | National Bridge Debt – Non-Recourse with sub-1.0 Coverage GSP is working with a national real estate capital provider funding middle market bridge/reposition assets a non-recourse basis. Transactions to 85% for multifamily, 80% for commercial and 75% of cost for hospitality are funded from $5,000,000 to $40,000,000. Special Use assets will be considered, but specializes in full and limited service hospitality properties. Interest reserves may be structured for vacant or under-performing cash flows. Par pricing ranges from LIBOR+575 to 700 based on risk for a three year term. |
| | | 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 | Founding Partner/Managing Director Steve Bram will be speaking at the 33rd Annual Real Property Retreat on Saturday May 3rd at the Tenaya Lodge. The three-day event will take place at the Gateway to Yosemite; a half hour drive north of Fresno, California. Mr. Bram will be addressing the Road to Recovery and Lessons Learned. Information on the retreat is available on-line. | | | NNN Property Financing – Part 3 of 3 | Lenders typically add as much as 75 basis points to the interest rate for tenants not considered credit or if the lender perceives there is more risk. STNL (single-tenant net leased) properties with leases of 15 years or more of term remaining may qualify for longer-term loans although the amortization schedule (typically 20, 25 or 30 years) may be shortened depending on the lender’s perceived “dark value.” Debt coverage ratios could start as low as 1.15% and LTV’s as high as 75% for credit tenants. Investment grade tenants may qualify for a CTL structure. CTL, which stands for “Credit-Tenant Lease Financing” is available for rated tenants with loan pricing based on a debt coverage ratio of 1.01%. A CTL loan usually self-liquidates is fully amortizing and will take into account scheduled increases to provide maximum loan proceeds but leaves little if no cash flow. Phantom income tax implications, usually after the 12th year of the loan, may present future income tax exposure and require an alternative off-set. Given the appetite of lenders for STNL properties and relatively good supply of them across the country, the stars are aligned for these investment opportunities. Choosing the right lender and land terms to match the investment strategy of the investor are paramount. Stephen Stein | | | Pascale’s Perspective | Yield Curve Flattening The recent month has seen the 10-year T trade in a pretty consistent range between 2.65% and 2.80%, closing today at 2.70%.... Tensions in Ukraine and a weaker than expected new-home sales report (actually a drop in March 2014) kept yields from spiking. The 5 year note gained only slightly even with a new $35 billion auction. The formerly steep curve is slightly flattening, also recent speculation that 5 year yields will rise as the Fed buys less MBS over the next few months. Markets will be watching the forward guidance from this month’s Fed statement closely; it will be a 2 day meeting. Interestingly the 2 year note yields are spiking on speculation that the Fed will have raised the short term rate (which has been frozen since Dec 2008) by the time the 2 year notes mature in April 2016. This follows a long period of ultra-low rates (and sometimes negative net rates) on short term Treasuries. Watch for 3 month to 1 year yields to pick up during 2015. …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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