GSPartners
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Volume XXI | No. 38 | October 8, 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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1.55%
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5 Yr Swaps
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1.73%
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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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2.32%
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10 Yr Swaps
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2.46%
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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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3.05%
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| | | Transaction Description: | | $25,300,000 Refinancing Southern California Class A Creative Office GSP placed the cash out refinance of a 100,000 square foot creative office portfolio in Southern California. The property consists of 4 buildings and is currently 100% occupied by creative office tenants who occupy spaces ranging from 400 square feet to 24,000 square feet. The non-recourse loan was underwritten to an 8.0% debt yield, fixed for 10 years at 4.49% with a 30 year amortization schedule. |
Challenge: There is significant tenant roll within the next six months and 70% of the space rolls by the 4th year. One tenant leases 15% of the net rentable but occupies indirectly through special service agreements. The property requires long term parking leases with affiliated properties in order to meet zoning requirements. |
Solution: GSP structured a $500,000 TI/LC & CapEx reserve funded at close to address potential short-term tenant roll. Of those funds, $125,000 is immediately available for Capital Improvements. GSP prepared detailed analysis of the parking and tenant business plans that mapped out the availability versus need/usage of the parking component. |
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| | | Transaction Description: | | 90% LTC Ground Up 75 Room Skilled Nursing Facility (SNF) in US Southwest GSP successfully placed a $4,700,000 senior construction loan for the Ground Up Construction of a 75 Bed SNF. The New State of the Art SNF will serve a community that has not had a new SNF built in over 15 years. The Sponsor had planned on using EB5 Financing, but the process was too slow, expensive and time consuming. |
Challenge: In a market where construction financing and equity are both tough to obtain, several developers look to EB5 Financing where you can obtain debt or equity from investors who want to earn a visa in exchange for creating US Jobs. Even with the Sponsor’s success in setting up an EB5 regional center, the process can take years, and cost hundreds of thousands of additional dollars. |
Solution: GSP took control of the capital process and met with EB5 Brokers, as well our relationship lenders, and our lenders in the market. We were able to show one of our community development lenders the benefits of the project, and have them do high leveraged first mortgage financing to 90% of the capital stack. This allowed the project to move forward without costly third party equity. The financing allowed our operator to own the entire project with limited equity investment |
| | Rate: 7.75% Fixed Construction; 7.25% Perm | | Term: 18 Month Construction; 10 Year Perm | | Amort: 18 Month IO; 25 Years | | LTC: 90% | | Prepayment: 3,2,1 | | Recourse | | Advisor: Bryan Shaffer |
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| | | Transaction Description: | | $2,080,000 Permanent Refinance of a Neighborhood Retail Center GSP successfully placed the $2,080,000 refinance for a stabilized 2000’s vintage retail center in Long Beach, California. The center is 100% leased and occupied with a diverse mix of national and local tenants. Fixed at 4.75%, the ten-year loan amortizes over 25-years and has flexible pre-payment, allowing for up to 10% of the initial loan balance to be paid down per year without penalty. |
Challenge: Sponsor sought a permanent loan that offered a 10-year fixed term with flexible prepayment. The small loan amount made it ineligible for most institutional lending programs. |
Solution: GSP leveraged lender relationships and demonstrated strong sponsorship to identify a capital source willing to lock in a long-term fixed rate loan for a transaction that is typically too small for many capital providers to underwrite. Based on the borrower’s strength, the lender agreed to a prepayment structure whereby the Sponsor may pay down up to 10% of the original loan principal annually. |
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| | | | National Bridge & Mini-Perm from $2,000,000 GSP is working with a national non-recourse bridge and mini-perm lender funding from $2,000,000-$10,000,000. Rates are fixed from 5.5% to 6.0%. Both platforms finance core asset types plus self-storage, mobile home parks, and parking facilities. Bridge financing advances to 80% LTC and does not require cash flow at funding. Mini-perm loans advance to 75% LTV subject to a 7.5% minimum debt yield. Terms for both programs range from 12 to 60 months. |
| | | 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 Principal Gary M. Tenzer will be moderating the finance panel at the Real Share Apartments Conference on October 15th and 16th. Unlike prior conferences, this will be a two-day event. Mr. Tenzers’ panel will focus on alternatives to agency debt for multifamily acquisitions. The agenda and registration information is available on-line | | | Realty Mogul Speaker Series | Founding Member Steve Bram was recently featured by Realty Mogul Speaker Series, and discussed equity raises for commercial real estate developments. The six-minute interview with Mr. Bram may be viewed on-line. | | | Pascale's Perspective |
Treasury yields plummet…Last week’s “positive and mixed” release of the September jobs report was supposed to have a “Goldilocks” effect on treasuries, ie something for both inflation doves and hawks to chew on…..The unemployment rate dropped below 6.0% or near the “normalized” rate in the mid 5’s. For a while, the 10 year treasury held in a trading range around 2.50%. However, this week saw the 10 year yield drop to 2.30%, even with a new auction of $21 billion today. Several factors are at work: (1) Deflation and economic contraction in Europe has led to ultra rare negative interest rates (banks charging depositors to hold cash) and further quantitative easing. Deflation is being spurred by weak demand in Asia/Europe and a brewing oil price war among OPEC countries (partially affected by major increases in US output); (2) Parsing the jobs report-there is not enough wage inflation, therefore workers do not have increased spending power and the Fed is concerned that rising rates could lead to the consumer being squeezed in our consumer based economy…..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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