GSPartners
|
|
|
|
Volume XXI | No. 30 | August 13, 2014
|
|
|
|
|
|
|
|
|
|
KEY RATE INDICES
|
|
Prime Rate
|
3.25%
|
1 Month LIBOR
|
0.16%
|
5 Yr US Treasury
|
1.58%
|
5 Yr Swaps
|
1.74%
|
|
12-MAT
|
0.12%
|
3 Month LIBOR
|
0.24%
|
10 Yr US Treasury
|
2.42%
|
10 Yr Swaps
|
2.57%
|
|
11th Dist COFI
|
0.67%
|
6 Month LIBOR
|
0.33%
|
30 Yr US Treasury
|
3.25%
|
|
|
|
| | | Transaction Description: | | $4,475,000 Secured Revolving Line of Credit on Four Under-Improved Parcels Jonathan Lee successfully placed a revolving credit line to provide working capital for an experienced developer with a very active production pipeline. The line of credit was securitized by four recently purchased parcels (2013/2014) for the purpose of developing luxury apartment buildings. Floating at 300 basis points over LIBOR, the revolver carries an 18 month term before extensions and is sized to 50% of acquisition price for the under-utilized land. |
Challenge: The properties available for the credit line are infill sites with leased SFR. The lender originally valued the four parcels using in-place NOI, negatively impacting loan proceeds under the 50.0% LTC stipulation. |
Solution: GSP worked with the lender to support a raw land value using a land value entitled for multifamily rentals for the four parcels by demonstrating a clear path to entitlements and coupling that with entitled land comps. Using a bank ordered appraisal, the lender obtained the land value to achieve adequate loan proceeds. |
| | Rate: LIBOR+3.0% | | Term: 18 Months + Two-6 Mnt Exts | | Amort: Interest Only | | LTC: 50.0% | | Recourse | | Advisors: Jonathan Lee, Adam Candler |
|
|
| | | Transaction Description: | | $2,725,000 Loan for Reverse-1031 Exchange Purchase of Brick Multifamily Asset Shahin Yazdi successfully placed the 75% non-recourse acquisition loan on a 40-unit, brick construction apartment building in the mid-Wilshire section of Los Angeles. The 15 year term is fixed for 3 years at 3.24% before floating over Libor, and features 3 years of interest-only. |
Challenge: The acquisition was structured as a reverse-1031 exchange, which allows for exchange monies to be used in the financing of rehab costs on the acquired property. This unusual and complex structure involved multiple entities, with transfer of title from the initial, temporary LLC, which was owned by a third party, to the final holder taking place 140 days after close of escrow. |
Solution: Despite the existence of two separate borrowing entities, GSP was able to demonstrate to the lender that only the final borrowing entity would require underwriting, saving considerable time and effort. Through diligent coordination, early identification of future problems, and regular contact between GSP, lender, lawyer, and sponsor, the bank became comfortable with the structure and closed quickly. |
| | Rate: 3.24% Fixed for 3 Years | | Term: 15 Years | | Amort: 3 Years IO; 30 Years thereafter | | LTV: 75% | | Non-recourse | | Advisors: Shahin Yazdi, Henry Elder |
|
|
| | | Transaction Description: | | $8,750,000 Out-Parcel Retail Acquisition Financing GSP successfully placed the acquisition loan of $8,750,000 for the purchase of an 180,000 square foot retail center in Baton Rouge, Louisiana. The collateral consists of non-contiguous out-parcels on the southern portion of the ring road surrounding the Cortana Mall. Tenants include Old Navy, Bed Bath and Beyond, Guitar Center, and Shoe Carnival in four buildings in addition to two multi-tenant buildings. The property, mall, and other retail in the immediate area serve as a major retail hub in the Baton Rouge area, which is primarily geared toward middle and working class consumers. Our client also acquired three former restaurant pads on 22,424 square feet of land and 18.55 acres of vacant land. The appraiser valued the occupied buildings in excess of the total acquisition price allowing the vacant land to be released at closing and not encumbered by the acquisition lender. Fixed at 4.54% for 10 years, the non-recourse loan is interest only for the first four years before it begins to amortize on a 30 year schedule. |
| |
|
| | | | National Non-Recourse Reposition From $10,000,000 w/More Leverage GSP is working with a national lender focusing on opportunistic investments in primary and secondary markets, funding senior & subordinated debt to 97% of total capitalization. Minimum transaction requests of $10,000,000 are considered for vacant buildings, adaptive reuse, condo inventory and bulk single family residence (own to flip/own to rent) nationwide. Rates range from LIBOR+5.5% for low/no cash flow assets to LIBOR + 3.75% for break-even assets. Completion guarantees are required for major construction. |
| | | 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 | | | Where 1031 Exchanges, Trusts, and Non-Recourse Financing Meet | Many investors own real estate in a trust to mitigate tax consequences. If you are using a 1031 exchange to roll equity into commercial real estate acquisition, it’s important to discuss your options with your real estate attorney. As a case study, a borrower recently went into application for a non-recourse CMBS loan where there were three LLCs purchasing a retail center as tenants in common (TIC). Two of the TICs previously owned residential real estate in a trust and formed California LLCs to invest in the subject acquisition. Because the LLC had only one member (the trust), it did not qualify as an eligible Special Purpose Entity (SPE) for the CMBS loan. With only one member, there is a risk of dissolution as there is no non-debtor interest to protect the continuity of the entity. In order for the LLC to maintain the eligibility for a 1031 exchange, the entity must be a single member disregarded entity. The borrower could not simply add a small minority partner to the California LLC. The solution: form a single member Delaware LLC. Delaware LLCs require the entity to elect a ‘springing’ member to ensure that during a death or dissolution of a member, an automatic replacement is made to ensure the continuity of the entity without adding an additional member to the entity. Ameet Chagan | | | Speakers Corner - Crowdfunding Today | Founding GSP Partner Gary M. Tenzer will be moderating the panel “What It's Like to Crowdfund a Deal as a Sponsor” at the upcoming UCLA/Ziman Crowdfunding Conference on August 27th. The 8am event will be held at the Covel Commons on the UCLA Campus. Conference agenda and registration information is available on-line and discounted registration (promo code ZIMANVIP2014) is available for a limited period of time. | | | Pascale’s Perspective |
Treasury Yields have dropped below the key technical level of 2.44. Last week the treasury hit a low of 2.35 and is closing today at 2.43. The chief reason for the drop in the Treasury is stems from a flight to quality due to global concerns (Mideast, Ukraine, Ebola, economic concerns in Germany and China). Up until now the credit markets (CMBS spreads) have been immune to such concerns. Spreads have rallied unchecked for an extended period of time without any disruptions. That trend ended in the past few weeks as CMBS spreads have widened 15-20 basis points. CMBS investors are concerned about achieving a minimum yield, therefore demanding a wider spread over treasuries as yields creep down. Investors in the credit markets are also reacting to the aforesaid global concerns, a large supply of new CMBS bond issuance, and a perception that underwriting standards have become more aggressive. Additionally the swap spread has widened with the ten year swap which has stood firm at 11 basis points now widening to 15-17 bps. The swap spread has widened on the expectation that floating rates (such as libor) are finally expected to rise as early as 1st quarter 2015 (note that the swap spreads are based upon the relationship between fixed and floating rates). New loans for full leverage ten year are still being priced in the 4.50 – 4.60 range however uncertainty in the markets has increased.
|
|
|
|
|
©2014 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of
George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
|
|
|
|
|
|
|
|
