GSPartners
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Volume XXI | No. 17 | April 30, 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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1.68%
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5 Yr Swaps
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1.76%
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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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2.75%
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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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3.46%
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| | | Transaction Description: | | $12,100,000 68% Loan to Cost, Limited Recourse Construction of 45 Apartment Units in Los Angeles GSP successfully placed $12,100,000 of ground-up construction financing for a 45-unit limited amenity transit-oriented apartment development in Los Angeles. Recourse was limited to a 25% repayment guarantee; burning down to zero once a 9.10% debt yield is achieved. The senior loan was sized to 68% of total cost and priced at LIBOR + 2.65%. The three year loan equates to $269,000 per door. |
Challenge: Thirty-five days before the Sponsor had a hard date to begin construction, the Sponsor’s original Lender reduced proceeds due to a low appraised stable net operating income that dropped the debt yield below the threshold stipulated at application. In order to maintain the debt yield the lender cut proceeds to a level that made the transaction unfeasible for the Sponsor. |
Solution: GSP stratified the appraisal numbers into loan-to-value and debt yield conclusions, and identified a new capital provider focused on loan-to-value sizing versus debt yield sizing. The new lender accepted an 8.17% debt yield on appraised stable net operating income because they focused more on the stabilized appraised loan-to-value. The result is the Lender was able to achieve the required proceeds and close within thirty-five days and did not require a new appraisal. |
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| | | Transaction Description: | | $4,300,000 Refinance of 46% Occupied Retail Center GSP successfully placed the refinance of a 46% occupied retail center located in Chula Vista, California. The 94,000 square foot center was slated for residential reposition before the economic downturn. Despite the significant vacancy, the in-place cash flow supports a 1.25 actual debt coverage ratio. The floating rate loan is priced at Prime + 1.5% with a 5.5% floor. |
Challenge: In 2006, a decision was made to redevelop the property with reduced amount for commercial space and a majority of the lot dedicated to multifamily residential use. Tenant leases were not renewed in preparation for the new use and configuration. The economic downturn in 2008 scuttled the development plans yet a large vacancy had already been created. |
Solution: GSP identified a lender that understood the property’s story and provided a flexible loan that will allow the sponsor to redevelop a portion of the site while continuing to increase occupancy in the retail component. The in-place cash flow and Sponsor repayment guarantee added credit support and debt service paid current with amortization. |
| | Rate: P+1.5% w/5.5% Floor | | Term: 5 Years | | Amort: 30 Years | | LTV: 65% | | DCR: 1.25 | | Prepayment: None | | Recourse | | Lender Fee: 0.75 | | Advisor: Jason Gaffner |
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| | | Transaction Description: | | Full Leveraged Acquisition for a Southern California Mixed-Use Asset Shahin Yazdi successfully placed a 70% Loan to Purchase for the acquisition of a retail and office building in Eagle Rock, California. The tenant mix consists of local businesses that all hold short-term leases and no credit enhancement. There is 100% roll exposure during the next three years. The rate is fixed at 4.20% for 5 Years before floating a 2.90% over the six-month LIBOR. There is three years of interest only before rolling into a 30 year amortization schedule for this non-recourse loan. |
| | Rate: 4.2% Fuxed for 5 Years; LIBOR+2.9% | | Term: 10 Years | | Amort: IO for 3 Years; 30 Year Amort Thereafter | | LTC: 70% | | Non-recourse | | Advisor: Shahin Yazdi |
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| | | | Regional Bank Funding Bridge/Construction Nationwide; Blemishes Welcome GSP is working with a regional bank who recently expanded operations to fund reposition and ground-up construction on a national basis for California borrowers. Core assets plus hotels, tract housing, estate homes and marinas are underwritten to 65% of cost. Non-recourse will be considered for 50% of cost requests for construction, slightly higher LTCs for cash flowing assets. Coupons in the low 4% range are funded on transactions from $5,000,000 to $45,000,000 without the aid of syndication. Story borrowers with viable business plans and strong product/location will be considered. |
| | | 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 | | | Feet Don’t Fail Me Now…. | A hearty congratulations to GSPs Jason Gaffner who completed the Boston Marathon last week in an impressive 4:20.56! (Mr. Gaffner was a mile short of the finish line last year when the race was ended). A great feet – or is that feat – and a very impressive accomplishment. Congrats! | | | In The Press | GSPs Gary E. Mozer was recently quoted in Commercial Property Executive’s May issue. With a $200 Billion target for 2014, the article regarding CMBS recovery is available on-line. | | | PASCALES PERSPECTIVE | Is the “Contrarian Mentality” Starting to Ebb? Today may turn out to be a significant day in market mindset. Since the financial crisis, markets have become “addicted” to central bank stimulus and often panic on any news that said stimulus is abating or ending. Bad economic news became “good news” as it meant that the Fed and other central banks would continue with the ultra-accommodative measures. Markets often rallied on disappointing macro-economic news. Today started with the 1st Quarter GDP announcement, a meager 0.1%. Then everyone awaited the release of the Fed minutes. The Fed did not waver in the tapering program, cutting bond purchases to $45 billion this month, still on schedule to end Quantitative Easing in Sept or Oct of this year. The Fed also indicated their confidence in the economy and wrote off the GDP to the harsh winter. The Fed also indicated that the Fed Funds Rate will remain at near zero for a significant time, most likely well into 2015. Markets rallied, investors may have gotten nervous if the Fed had deviated from the course set last year based on the GDP report, maybe good news is actually good news and that aspect of the “new normal” is ebbing…. ...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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