GSPartners
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Volume XXI | No. 32 | August 27, 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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1.64%
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5 Yr Swaps
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1.78%
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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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2.36%
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10 Yr Swaps
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2.51%
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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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3.11%
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| | | Transaction Description: | | $18,905,000 Acquisition Loan for a Class A Colorado Springs Apartment Jonathan Lee arranged the financing for the acquisition of a 208 unit stabilized apartment building in Colorado Springs, Colorado. Located next to Fort Carson, one of the largest military bases in the country, the subject was over 98% occupied at time of close. Over 70% of occupants are on current active duty. The non-recourse loan is interest only at 4.33% for the first six years of the term before amortizing over a 30 year schedule for the remaining four years of the loan. |
Challenge: The asset is predominantly occupied by active personnel who require 30 day lease cancellation notice when called for deployment. This allows for the potential of high vacancy in times of national crises. Base closures that occurred in the late 1990’s have left a lingering stigma within the lending community to base-centric multi-family assets. To generate solid returns for investors, the Borrower requested both maximum I/O and leverage. |
Solution: Using the property’s historical data and coupling it with deployments in Afghanistan and Iraq, GSP proved occupancy dipped, but did not overwhelm the economics of the property. GSP Analyst Adam Candler, a 6 Year veteran of the US Navy, demonstrated to lenders that the base offers amenities and key services to families of soldiers who are deployed, lending assurances that family are likely to remain upon deployment. GSP also showcased the growth of Fort Carson with $2 Billion invested in the base over the past ten years, indicating that Fort Carson is a core military installation that will reasonably withstand future Pentagon cuts. |
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| | | Transaction Description: | | $5,900,000 Non-Recourse Bridge Acquisition & Reposition to 78% of Cost George Smith Partners placed the acquisition debt of a 168 Unit Class C multifamily apartment building in Colorado Springs. $1,500,000 of the capitalization is slated for capital upgrades averaging $9,200 per unit. Priced at L+5.50%, proceeds were sized to 78% of total cost on a non-recourse basis, interest only for two years prior to options. |
Challenge: Colorado Springs is not considered a core MSA. The sub-$10,000,000 loan request added to the challenge as most debt funds are flush with cash yet don’t carry sufficient staffing to underwrite smaller transactions. Historical cash flow information was spotty and the buyer required 78% leverage combined with a certainty of execution to accommodate his 1031 exchange. |
Solution: GSP identified a DUS underwriter specializing in smaller executions on a national basis. This funder utilized their balance sheet for an on-book funding to control the due diligence process and provide assurance that the transaction would close as applied for. High leverage proceeds were secured by underwriting an 80% of profroma value once stabilized as confirmed by market studies and a third-party bank ordered appraisal. As part of a loan feeder program, the underwriter will waive the 1 point exit fee should they provide the take-out financing. |
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| | | Transaction Description: | | $2,170,000 Construction to Permanent Financing of a Natural GAS Automobile Filling Station GSP arranged the construction financing for a Natural Gas Filling Station in Inglewood near LAX Airport. This station will service cars and busses equipped to operate on natural gas. The two year construction loan rolls to a 15 year permanent loan due in 15 years. Fixed for three years at 4.75%, the rate will reset to a 3 year LIBOR swap thereafter. The loan self-liquidates; there is no balloon risk to the Borrower. |
| | Rate: 4.75% Fixed for 3 Years | | Term: 17 Years | | Amort: 2 Year IO; 15 Years Thereafter | | Recourse | | Advisor: Raffi Sarkissian |
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| | | | 90% Loan to Cost for Ground-Up Construction from $10,000,000 GSP is working with a pension fund advisor actively funding ground-up construction projects with a total capitalized value of $10,000,000 to $20,000,000. Shovel ready projects in Southern California are underwritten with union labor contractors. This is a one-stop shop for debt and equity up to 90% of cost. Although there are no IRR thresholds, an arms-length sale at stabilization will be required to maximize projected yields. This program is customized for the small and mid-size developers. |
| | | 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 Steve Bram will lecture on Commercial Real Estate Project Financing on behalf of Professor Michael Keston’s USC Real Estate Development Class, Thursday September 18th. Please contact Shannon Bradley to schedule Mr. Bram for student lectures or speaking engagements. | | | Pascale’s Perspective | Europe/US Central Bank Divergence Lowers Treasury Yields? Last week’s Jackson Hole conference was dominated by speeches by ECB Chair Draghi US Fed Chair Yellen. Their speeches indicated a divergence: Draghi is concerned about very low inflation (and therefore the specter of deflation) as the Euro economic indicators are recessionary. This raised the possibility of aggressive quantitative easing by the ECB, therefore bond yields are plummeting. 10 year Bond yields are rock bottom, Germany (0.91%) has been low for a while, but the “shockers” are Spain (2.14%) and Italy (2.39%). Remember, these economies were on “watch list” in the past few years with bond yields approaching 8.00%. These rock bottom yields are driving investors to US Treasuries for a “safer yield play” as the 10 year Treasury closed at 2.36%; well below the recent key technical floor of 2.44%..... Credit Spreads: Life companies are aggressively pricing over the treasury and ignoring recent CMBS widening for lower leverage. All-in rates for 10 year institutional quality assets are under 4.00%, CMBS full leverage (even with the recent widening) still at or around 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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