GSPartners
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Volume XXI | No. 42 | November 5, 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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1.63%
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5 Yr Swaps
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1.77%
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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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2.34%
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10 Yr Swaps
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2.49%
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11th Dist COFI
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0.66%
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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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3.06%
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| | | Transaction Description: | | $172,300,000 National Portfolio Non-Recourse Bridge Financing; 36 Properties in 17 States JJay Brooks successfully arranged $172,300,000 of bridge financing for a portfolio of 36 properties spanning 17 states (from Louisiana to Alaska) that had been mired in complex litigation for several years. Assets included regional malls, office buildings, industrial properties and mobile home parks located in secondary and tertiary markets. Although the initial debt was being serviced, the litigation resulted by a loan maturity default during the recession when the capital markets where devastated and the existing lender would not negotiate an extension. Settlement of the litigation required certainty of close with a “drop-dead date” that would have resulted in significant borrower losses had the financing not closed. The final debt structure involved two unrelated lenders with multiple layers of senior and mezzanine debt, structured over five loans. Prepayment and yield maintenance flexibility was a critical component of the structure that allows the borrower to extract properties from the financing in the coming years. Generally speaking, the loans were priced with either a floating (with an interest rate cap) or fixed interest rate with six months to 24-months of yield maintenance. Leverage varied depending on the stability of the asset and the term was structured to provide adequate time to liquidate several assets and identify permanent debt for others. |
Challenge: Numerous property specific complexities such as ground leases, environmental issues and major capital and tenant improvement projects required underwriting and loan structuring. The stigma associated with properties (and borrowers) involved with litigation associated with a default disqualifies many lenders from considering the financing described. The portfolio size, location and varied property types also create additional complexity and challenges. Certainty of close was mandatory. |
Solution: GSP identified the lending platforms and professionals that could underwrite, appropriately price and structure the cash flows. The solutions required to solve all the challenges are too long to list although the financing required the cooperation and collaboration of an incredibly talented group of professionals on both the lender side and the borrower side of the financing. All parties came together to solve problems and pull from a depth of knowledge. |
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| | | Transaction Description: | | $4,000,000 Ground-Up Construction Financing of a Nine-Unit For-Sale Condominium George Smith Partners successfully placed the financing to construct a nine-unit luxury condominium project in a very desirable Studio City, California location. The Sponsor purchased the land, currently improved with a single family residence, in 2011 and began the entitlement process. Sized to 75% of actual cost, the 12-month term is priced at 11.5% plus a three point lender origination fee. |
Challenge: Despite the Sponsor being an experienced developer with years of experience, litigation following the housing crisis in 2008 placing significant strain on the ability to source construction capital for “For-Sale” units. A city provision in the entitlements offered a very tight time-frame when construction could begin. |
Solution: Market research supported the Borrowers’ business plan and exit sale prices. A private non-institutional capital source was identified for a quick-close and certainty of execution as applied for. |
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| | | | National Mini-Perm Capital: $1,000,000 - $12,000,000 GSP identified a regional portfolio lender funding cash-flowing commercial assets “with moving pieces” and blemishes nationally in major MSAs. Marginal borrowers with credit issues are considered as are alternative use assets involving operating companies (golf courses, marinas, hotels), and underwritten to a 1.20 dcr. Recourse may be required to 75% LTV although non-recourse is available sub-65%. Fixed for three years rolling to a two-year floater, coupons start a 6% amortized over 25 years at par. |
| | | 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 | | | In The Press | Commercial Property Executive interviewed founding partner Gary E. Mozer on the market value of net-leased assets. Mr. Mozer reviews the current field of owners/purchasers and the over-all attraction to capital providers. The entire article is linked here. | | | Pascale’s Perspective | Treasury volatility is low as the 10 year continues to trade in a tight range, closing today at 2.35%. Perhaps the better than expected US GDP report indicating 3rd quarter growth at 3.5% put a “floor” in as traders now look to a Fed rate hike in early to mid 2015. Credit Spreads: CMBS spread volatility has also ebbed, but there is some indication that pricing widened due to some technical tranching requirements in the higher risk bond spectrum. CMBS originators indicate that spreads for full leverage loans are “about 205”, netting all-in coupons at 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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