FINfacts XXI-34

GSPartners

Volume XXI | No. 34 | September 10, 2014

KEY RATE INDICES
Prime Rate	3.25%	1 Month LIBOR	0.16%	5 Yr US Treasury	1.79%	5 Yr Swaps	1.93%
12-MAT	0.12%	3 Month LIBOR	0.23%	10 Yr US Treasury	2.54%	10 Yr Swaps	2.68%
11th Dist COFI	0.66%	6 Month LIBOR	0.33%	30 Yr US Treasury	3.27%

Transactions of the Week

Transaction Description:

$4,700,000 In-Line Retail Acquisition Financing to 75% of Purchase George Smith Partners successfully placed the acquisition financing of a multi-tenant strip center located in Ventura, California. The 24,500 square foot center, anchored by Pep Boy’s, Frazee Paint and a Sizzler Restaurant, was acquired as the replacement property for a 1031 exchange. Sized to 75% of purchase, the 10 year loan is fixed for 5 years at 4.25% before floating over Prime. Amortized over 30 years, there is no pre-payment penalty for this recourse loan.

Challenge: A 4,000 square foot space had remained vacant for more than 3 years, adding to the challenge to secure necessary loan proceeds required to fund. The appraiser also struggled with how to value this space given the length of vacancy. The buyer’s exchange deadline to close escrow was approaching and available cash equity was limited to 25% of purchase.

Solution: Mr. Stein identified a portfolio lender with who is very active in the Ventura commercial market. GSP successfully demonstrated to the lender that the seller had little retail experience and refused to consider viable leasing opportunities for the vacant space. A local leasing agent confirmed a list of possible tenants for the vacant space. The Borrowers’ business plan combined with his retail resume offered additional comfort to the appraiser and lender that the vacancy would be leased shortly post-close.

Rate: 4.25% Fixed for first 5 Years; Prime + 1.25

Term: 10 Years

Amort: 30 Years

LTC: 75%

Prepayment: None

Recourse

Advisors: Stephen Stein, Teddy Stutz

Transaction Description:

$5,518,000 Acquisition Los Angeles Brick Multifamily Shahin Yazdi successfully placed the 75% non-recourse acquisition for the purchase of two 40-unit, brick construction apartment buildings in the mid-Wilshire district of Los Angeles. The property was under-managed and lacked historical records. Cash flow that was furnished did not always foot. Title showed a commercial lease recorded that was not evidenced at the property. GSP was able to work with the selling broker to correctly document title and the correct operating cash flow prior to funding. The two 15 year-term loans are fixed for 3 years at 3.24% interest-only before floating over LIBOR, amortized over 27 years for the remaining 12 years.

Rate: 3.24% Fixed for 3 Years; LIBOR+2.5%

Term: 15 Years

Amort: 3 Years IO, 27 Years Thereafter

LTC: 75%

Non-recourse

Advisors: Shahin Yazdi, Henry Elder

Transaction Description:

78% LTC Acquisition of Shadow Anchored Retail Center in a Tertiary Market Loren Bedolla successfully structured the 78% loan-to-cost purchase of in-line retail space, shadow-anchored by a regional dry-goods store. Located in a tertiary Indiana market, the collateral was 81% occupied by a mix of national, regional, and local tenants. Fixed at 4.75% for five years, the loan is amortized over 20 years.

Challenge: The property’s MSA consisted of a population of less than 10,000 residents in an area of Indiana that struggled significantly during the recession. The Borrower is an out-of-state investor, with no other commercial assets in this market.

Solution: GSP identified a regional capital provider knowledgeable about this location and was comfortable with the investor’s financial strength, retail experience and business plan. GSP vetted the risk exposure in advance with the lender and worked to structure objective criteria to satisfy both the Borrower and lender prior to the execution of the application, resulting in a highly leveraged and reasonably priced acquisition loan.

Rate: 4.75% Fixed

Term: 5 Years

Amort: 20 Years

LTC: 78%

Prepayment: 1%

Recourse

Advisor: Loren Bedolla

Hot Money

Condominium HOA Financing George Smith Partners identified an institutional capital provider advancing capital improvement funds to existing HOA associations on a non-recourse basis. The lender advances direct to the association without trust deed or UCC collateralization. Transactions from $50,000 to $5,000,000 are self-amortized over three to 15 years at a spread of 300 over corresponding treasuries. Funds may be used for upgrades or the addition of new common area amenities. Units must be 60% or more owner-occupied.

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

Treasuries yields rise based on lowering volatility and supply issues, CMBS spreads “turn the corner”…..Both Treasuries and CMBS are absorbing high volumes ($61 Billion in Treasuries this week w/$3-$5 Billion in CMBS being marketed). So the market’s ability to absorb the issuance with small rises in yields shows bullishness. Treasuries hit a high not seen since late July, 2.54% today, however, bid to cover ratios indicated healthy demand. The general can be attributed to a “rethinking” of last week’s disappointing job report (another “anomaly”?), a lack of concern over global issues (including the unforeseen global economic consequences of Scotland independence ie; potential currency issues), and European bond yields coming up from their recent rock bottom rates….. CMBS issuers have become more aggressive as spreads have tightened slightly, new full leverage loans are being quoted at 190 over Swaps today for a 4.60% coupon. …..stay tuned... David R. Pascale, Jr.

FINfacts Newsletter XXI-34

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