GSPartners
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Volume XXI | No. 40 | October 22, 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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1.43%
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5 Yr Swaps
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1.60%
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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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2.22%
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10 Yr Swaps
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2.35%
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11th Dist COFI
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0.67%
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6 Month LIBOR
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0.32%
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30 Yr US Treasury
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2.99%
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| | | Transaction Description: | | $11,800,000 Cash-Out Refinance of a San Antonio Apartment GSP secured an $11,800,000 non-recourse permanent loan for the 33 building apartment complex in San Antonio, Texas. This refi included a $3,400,000 return of equity to the borrower. Fixed at 4.55% for 10 years, the loan was sized to 78% of value and amortized on a 30 year schedule. |
Challenge: The Borrower requested maximum cash-out proceeds on a non-recourse basis for alternative investments. The current ownership structure presented significant issues due to 1) an internal layer of equity, structured as a mezzanine note, and 2) a non-profit partner. |
Solution: GSP identified a national capital provider headquartered in Texas. Their grass-roots knowledge of this housing market gave them comfort to offer proceeds at 78% LTV even with the excessive return of capital. A lender originated inter-creditor agreement allowed the remaining equity holder, whose interest was structured as a mezzanine note, to be recognized in order to maintain the current ownership structure. This inter-creditor agreement also identified the relationship between the Borrower and its nonprofit partner to avoid restructuring the Borrower. |
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| | | Transaction Description: | | $2,750,000 Non-Recourse Subdivision Construction Loan in Echo Park, California George Smith Partners successfully placed the financing to construct a seven-unit lot subdivision in Echo Park a Los Angeles suburb. The Sponsor purchased the land and began the entitlement process in March 2013. The project was designed as an alternative to older, more expensive detached single-family product common to this submarket. The non-recourse loan is funded to 85% of total project cost priced at Prime plus 2.5%, subject to a 6.5% floor. There is no profit participation at this leveraged level. |
Challenge: The Borrower was a first time builder who required non-recourse financing at a high advance rate. While the Echo Park stigma is rapidly diminishing, several capital providers do not yet consider this market as viable on a long-term basis. |
Solution: Mr. Lee recently financed several housing transactions in the immediate area. His recent tombstones and market information demonstrated real demand for additional affordable product so close to downtown Los Angeles. Although a non-recourse loan, GSP featured the financial strengths of the Borrower and his GC to offer assurances that the business plan would execute as prescribed. |
| | Rate: P+2.5% w/6.5% Floor | | Term: 18 Months | | Amort: Interest Only | | LTC: 85% | | Non-recourse | | Lender Fee: 1.5% | Advisors: Jonathan Lee, Adam Candler
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| | | Transaction Description: | | $4,350,000 Non-Recourse Cash-Out Refinance of In-Line Retail Center Shahin Yazdi successfully placed the 65% non-recourse refinance of a 16,100 square foot Southern California retail center. Fixed at 4.53%, the 10 year term provided for a substantive return of equity to the Borrower. Pre-payment penalty steps-down from 5% over the ten year term. GSP demonstrated the strong consistent operating history during the prior 5 years to maximize loan proceeds. GSP also facilitated with the defeasance process to maintain the closing deadline. |
| | Rate: 4.53% Fixed | | Term: 10 Years | | Amort: 30 Years | | LTV: 65% | | Prepayment: 5,5,4,4,3,3,2,2,1,1 | | Non-recourse | | Advisors: Shahin Yazdi, Henry Elder |
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| | | | National Single-Tenant Portfolio Lender GSP corresponds for a portfolio lender funding investor and owner/user single tenant real estate nationally. Although the loan term is conterminous with the lease, this is not a Credit Tenant Structure and can amortize well beyond the initial lease term. Traditionally non-recourse, transactions from $1,000,000 to $50,000,000 are funded for private middle-market tenants to investment grade leases. Credit base real estate underwriting allows for all product types and most Sponsor blemishes to be considered. |
| | | 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 | Market Volatility Ebbs for Now….. Treasuries: The 10 year treasury is trading in a relatively tight range near 2.20%, the volatility having ebbed. Last Wednesday’s sudden plunge in treasury yields and subsequent volatility was massive and sudden - at one point dropping about 12 bps in 15 minutes before quickly rebounding. Investors and regulators are looking at potential factors including algorithmic high frequency trading, which is now more prevalent in the bond markets and/or Dodd Frank regulations which limit the supply of tradable bonds, therefore increasing volatility during periods of large demand. At one point, a Fed governor attempted to soothe markets by implying that bond buying, scheduled to end Oct 29, would continue into the next few months. That seems unlikely at this point as the Fed would most likely delay the next rate raise as further stimulus. Credit Spreads: We have seen new CMBS loans quote with floors near 4.25% and spreads just under 200 over Swaps, all in rates approximate 4.30%. Life companies are sub-4.00% for good quality, lower leverage. …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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