GSPartners
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Volume XXI | No. 28 | July 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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0.16%
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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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2.47%
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10 Yr Swaps
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2.59%
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11th Dist COFI
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0.67%
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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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3.26%
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| | | Transaction Description: | | $53,400,000 Non-Recourse Bridge Financing for the Renovation of a Retail Property w/Operating Marina GSP structured and arranged the 73% Loan to Cost non-recourse bridge loan for the renovation of a boutique retail property and its adjoining marina. The project includes a 47-boat slip marina and a 372-space parking structure in addition to 91 on-grade parking spaces. The 123,000 square foot mixed use water front property consists of first and second story office and retail spaces in 14 separate structures with connected marina including 47 boat slips. The Sponsor plans to renovate the buildings and re-tenant the property to create an exciting retail environment that will comprise a mix of retail, restaurant, entertainment and other uses that will reach both the local customer demographic as well as draw regionally, utilizing the waterfront location. Of the 17 legal parcels, 13 parcels are owned in fee and 4 parcels located along the marina front are held as lease-hold interests. The 73% of cost non-recourse loan is priced at LIBOR+7.50% but offers a 50 basis point spread reduction as new leasing hurtles are met. The Borrower has 36 months until the initial maturity date with options to extend the loan for an additional 12 months. |
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| | | Transaction Description: | | $6,279,000 Construction Completion Debt for Georgia Medical Office Building GSP placed $6,279,000 of non-recourse financing to complete the construction of a 35,000 square foot medical office building space in Decatur, Georgia. The client was not a seasoned real estate developer but savvy enough to identify an immediate opportunity in a burgeoning market. The building was only partially completed and required additional construction financing to bring the asset to Certificate of Occupancy. Multiple lenders were not comfortable due to the sponsor being a relatively unseasoned developer and stepping into a partially completed construction project with a new general contractor. The Borrower was unable to provide a repayment guarantee due to a recent bankruptcy, open tax liens and pending litigation. Sensitive to initial lender deposits, the Borrower had previously been under application to a private lender who lacked discretionary capital and utilized the deposit as a profit center, without providing services. GSP procured market rate comps and supporting documentation to confirm market strength and provided an unsolicited LOI for a sale of the subject prior to obtaining the CofO. Sponsor capacity was substantiated by his ability to bring the asset to its’ current level of completion, retain a new GC and pre-lease 100% of the 35,000 square feet to multiple tenants. GSP called on their relationship sources to identify discretionary capital motived by funding loans over collecting one-off fees. The one-year, non-recourse floating rate term is priced at 10.5% and does not require a prepayment penalty. |
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| | | Transaction Description: | | 70% Loan to Purchase & Rehab for sub-$5,000,000 Multifamily Bryan Shaffer successfully placed the acquisition and reposition of a Los Angeles multifamily asset. The institutional lender funded the purchase in less than 30 days. Floating over Prime, the loan is floored at 5.0% for the three year term and does not carry a prepayment penalty or exit fee. Sized to 70% of total costs (purchase plus rehab), there is no amortization for the first year to allow for the reposition, but amortizes over 30 years thereafter. |
Challenge: Historically low capitalization rates add a challenge to secure any level of leverage when projects perform below market. Transactions under $5,000,000 are difficult to generate interest from non-private lenders in a market where size does matter. |
Solution: Mr. Shaffer identified an institutional capital provider who is actively funding multifamily in this sub-market of Los Angeles and did not require an “education” on the market strengths and metrics. The lender agreed to underwrite in-place cash flow on an interest only basis to secure the leverage needed to fund the acquisition and complete the necessary rehabilitation to generate future cash flow and subsequently improve asset value. |
| | Rate: Prime + 1.0%; w/5.0% Floor | | Term: 3 Years | | Amort: 1 Year IO; 30 Years Thereafter | | LTC: 70% of Total Capitalization | | Prepayment: None | | Recourse | | Advisor: Bryan Shaffer |
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| | | | Bank Club Execution for Ground-Up Construction Nationwide GSP is working with a bank syndicator networking with Community Banks nationwide. Most Community Banks are limited by size as to what they can execute. Like their money center bank relatives, Community Banks are flush with capital they need to deploy and are actively participating in ground-up construction requests west of the eastern seaboard. Apartments are funded to 80% of cost while pre-leased retail to 75% LTC. Flagged hospitality is sized to as high as 60% of cost. Recourse may be limited to a capitalized entity upon exception. Rates float over LIBOR with a 5.25% floor for the three year term. Credit quality GCs are required as the Borrower is precluded from acting as the General Contractor under this system. |
| | | 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 | | | Pascale's Perspective | Geopolitical concerns, low inflation drive Treasury yields down, the 10 year is near a 1 year low at about 2.45%.....Meanwhile, the yield curve is extremely flat with shorter termed treasury yields staying relatively high while the long end yields drop. CMBS trading remains active well into the summer as international concerns do not seem to be widening credit spreads. The last few weeks has seen some widening in the swap spreads, (about 3 bps), so all-in 10 year rates for full leverage now averaging below 4.50%...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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