GSPartners
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Volume XXI | No. 21 | June 4, 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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1.64%
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5 Yr Swaps
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1.72%
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12-MAT
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0.21%
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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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2.60%
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10 Yr Swaps
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2.72%
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11th Dist COFI
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0.68%
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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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3.44%
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| | | Transaction Description: | | $20,500,000 Acquisition for a 100% Vacant San Diego Office/R&D Building w/No Pre-Leasing GSP successfully placed the $20,500,000 on-book acquisition loan for a 250,000 square foot vacant office and warehouse R&D building with 100% vacancy and no pre-leasing. $10,000,000 of the 65% leverage financing was funded at acquisition, with the remaining $10,500,000 to be future funded for property improvements, carry costs, and tenant allowances. Interest will not be paid on the future funding until disbursement. The floating interest rate is reduced by 50 bps to LIBOR + 2.50% upon property lease-up and stabilization. The 3 year term is open to pre-payment after the 12th month with recourse limited to the top 25% of a capitalized entity. |
Challenge: Sponsor required a flexible financing structure allowing for a fluid business plan in order to execute either a single tenant or multitenant leasing scenario, based on future market demand. |
Solution: GSP identified a capital provider able to release funds incrementally to allow Sponsor optionality with the business plan and avoid paying interest on unused funds. In addition to the $10,000,000 initial funding, loan dollars were immediately available at closing for capital improvements, to be funded 50/50 with equity. Lender also funds a percentage of property operating and carry costs going forward. Tenant improvements and leasing commission dollars will be funded upon identification of tenant(s) on a 72/28 basis by the Lender and Borrower, respectively. The loan does not have a re-margin provision until Month 24, allowing Sponsor 24 months to execute the business plan without facing a potential capital call. |
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| | | Transaction Description: | | $4,400,000 Refinance/Discounted Payoff for a 60% Occupied 99 Cent Only Anchored Retail Center Bryan Shaffer successfully placed the bridge-debt refinance of a distressed retail strip center that was only 60% occupied at funding. The new loan replaced a 15% hard money loan which was syndicated to a group of investors who all had different agendas. The prior private lender who facilitated the initial DPO, agreed to forgive a portion of accrued interest to maintain the 70% valuation threshold for this execution. GSP worked to satisfy the title requirement of having 100% of the limited investors approve the terms. Sized to 70% LTV, the 25 year self-liquidating loan is fixed at 7.0%, yet provides for a step-down prepayment penalty. |
Challenge: The subject property is located in a distressed retail sub-market. This 60% occupied center has one dark anchor and a financially weak sponsor with 20 partners fighting about the future of this investment. |
Solution: Utilizing a very strong lender relationship GSP worked with a non-bank capital provider whom we have completed several loans with this year and succeeded in using this relationship to obtain loan approval. Mr. Shaffer met with several of the limited investors and was able to demonstrate how this execution was in everyone’s best interest. GSP also worked with the prior debt capital partners to orchestrate this closing. |
| | Rate: 7.0% Fixed for 25 Years | | Term: 25 Years | | Amort: 25 Years | | LTV: 70% | | Prepayment: 3,2,1 Open | | Recourse | | Advisor: Bryan Shaffer |
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| | | Transaction Description: | | $7,560,000 1031 Exchange Purchase of 100-Unit Rialto Apartment Building George Smith Partners successfully placed acquisition financing for a 100-unit apartment building in Rialto, California, acquired as borrower’s replacement property in a 1031 exchange transaction. The borrower requested long-term permanent financing to 70% loan to purchase with the ability to rate lock at application. The property has a history of high occupancy; there was only one vacancy at time of purchase. The 3.87% five year fixed rate was locked at application and carries a 4,3,2,1 prepayment penalty. The 30 year term amortizes over 30 years. |
Challenge: Rialto is an area of Los Angeles considered by many lenders as transitional. Those lenders initially contacted would only provide leverage to 65% of purchase on terms of 7 to 10 years. Crime records identified the property as having 3 meth labs in the late 1990’s. Although those operations ceased 14 years ago, many lenders tightened their underwriting to limit loan proceeds. |
Solution: Mr. Stein demonstrated to a portfolio lender the borrower’s proficiency in leasing and management of similar properties. The capital provider understood the value of the Sponsor’s management and leasing experience and became comfortable with the property’s long-term occupancy history and consistent debt coverage ratios. |
| | Rate: 3.87% Fixed for 5 Years | | Term: 30 Years | | Amort: 30 Years | | LTV: 70% | | DCR: 1.25 | | Prepayment: 4,3,2,1 Open | | Recourse | | Advisors: Stephen Stein, Teddy Stutz |
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| | | | Regional Bank Reach to the East Coast and Select Mid-Western States GSP is activity originating construction, bridge/reposition and perm debt for a California regional bank on a bi-coastal basis. Chicago, Texas and Southeastern major MSAs are also considered on a select basis. Transactions to $15,000,000 are funded without the requirement of participation. Construction requests are sized to 70% of cost (has actually funded 80% LTC recently) on core assets with flagged hospitality considered based on borrower strength. Recourse may burn down or burn off as LTV hurtles are met. |
| | | 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 Gary M. Tenzer will be a panel participant June 19th at the Opus Connects Real Estate Forum. The Thursday conference begins at 11:30 in Century City. More information and registration is available . | | | Pascale’s Perspective | Treasury Movements? Treasuries have been volatile the past week; the 10 year T dropped to a daily close of 2.44% last week on the report of a 0.1% contraction in the US GDP for Q1. This was attributed to weather related factors; with Q2 expected to be much better. However, the anomaly of a rallying stock market and bond market leaves some investors scratching their heads. Several factors are at play: (1) Short covering as traders bet wrong on rising rates; (2) Worldwide yield drops (Europe, Germany, Japan, England) based on their central banks and weaker than expected reports; (3) China buying treasuries to weaken their currency against the dollar; (4) Stock market rallies have bolstered pension fund balance sheets and reserves, they then buy bonds to balance out. Credit spreads continue to tighten, keeping all in loan rates in the low to mid 4’s. …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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