FINfacts XXI-43

GSPartners

Volume XXI | No. 43 | November 12, 2014

KEY RATE INDICES
Prime Rate	3.25%	1 Month LIBOR	0.15%	5 Yr US Treasury	1.65%	5 Yr Swaps	1.79%
12-MAT	0.12%	3 Month LIBOR	0.23%	10 Yr US Treasury	2.37%	10 Yr Swaps	2.50%
11th Dist COFI	0.66%	6 Month LIBOR	0.33%	30 Yr US Treasury	3.10%

Transactions of the Week

Transaction Description:

$11,173,624 Pre-Development Joint-Venture Equity Financing GSP successfully placed the pre-development capital for the construction of a luxury high rise condominium project. The capital allows the Sponsor to acquire the property, demolish the existing office building, finalize construction drawings, open discovery sales center and prepare the site for vertical development. GSP was hired by the Sponsor to provide advisory services throughout the development, including financing the bridge & construction loans. The 62-Unit project will contain 20 three-bedroom residences; 40 two-bedroom with a den, plus two one-bedroom “guest suites” that will be owned by the HOA and available to homeowners for their guests’ use. Units will feature spacious outdoor terraces, elegant open floor plans with gourmet kitchens, and single level living with highly functional designs. Project amenities will include an exclusive 24/7 concierge service, state of the art fitness center, private wine storage, gathering areas with fire pits and terraces, pet facilities, guest suites, and 24-hour security. Terms and structure are confidential.

Advisors: Malcolm Davies, Kyle Henrickson, Murtuza Razavi

Transaction Description:

$11,000,000 Non-Recourse Retail Permanent Acquisition Loan GSP secured an $11,000,000 senior loan for a multi-tenant retail center in Orlando, Florida. The Sponsor was seeking a 50% leverage, 10 year fixed-rate loan, from a portfolio lender with aggressive pricing. GSP identified a life insurance company that was able to rate lock for no fee at application at 3.95%, removing all rate volatility during due diligence. The Lender did not require any reserves or impounds, not even tax and insurance impounds. A flexible prepayment penalty was structured, allowing for a 3%, 2%, 1% step-down penalty in the last three years of the loan term.

Challenge: The property was constructed in 2009 and took three years to lease to market occupancy. The center does not have a strong national anchor and 17% of gross income comes from two billboards.

Solution: GSP demonstrated that the property would maintain current occupancy even though the initial stabilization was slow as the property leased very quickly once asking rents were decreased to 2010 market rent. GSP identified a lender who understood the value of the billboards given the visibility and traffic counts.

Rate: 3.95%

Term: 10 Years

Amort: 30 Years

LTC: 50%

Prepayment: 7 Years YM; 3,2,1

Non-recourse

Advisors: Steve Bram, Allison Higgins, David R. Pascale, Jr. Paul Monsen

Transaction Description:

$7,200,000 Debt Financing for the Recapitalization of a 112 Unit Colorado Multifamily Property GSP arranged the $7,200,000 first mortgage on a value-add Denver multifamily asset built in 1972, representing up to 70% of the current value plus 70% of reposition costs. The L+265 interest rate (2.80% all-in today) requires a rate cap at a 3.0% strike price for the first two years of the term with a required renewal for year three, thereby reducing the overall cap cost to the Borrower by shortening the cap’s duration. The three year term is Interest-Only for the first 30 months and requires principal and interest payments at a 30 year amortization schedule for the final six months of the term. With no repayment guarantee, carve-out guaranties are limited to a capitalized entity.

Rate: 30 Day LIBOR + 2.65%; 2.80% Today

Term: 3 Years plus two 12-month Extensions

Amort: 30 months IO; 30 year Amortization Thereafter

LTC: 68%

Prepayment: 1% months 1-12; open thereafter

Lender Fee: 0.75%

Brokers: Gary Mozer, Katie Rodd, Michael Anderson, Kyle Howerton

Hot Money

SoCal Joint Venture Equity “For Sale” Housing from $1,000,000 to $3,000,000 GSP is working with a small private equity firm originating JV Equity for ground-up housing on For Sale product. Assets may include SFR, condo or townhome configuration in Southern California. A 10% cash co-invest is required in exchange for a 10% preferred return to a 16% IRR on a 50/50 split. Land must be fully entitled at close.

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 and Credit Spreads “Stabilize” Since May 2014, Bill Gross has been touting “the new neutral” to describe the treasury market, ie; a policy by central banks to keep rates low (but not too low) in an era of global slow growth. The theory is that with mounting government debt, any rise in rates would need significant growth to service the debt. Until that growth appears, international sovereign debt rates must stay low. Growing global deflation concerns (China, Japan and Europe) bolster the theory, giving central banks less fear of sparking inflation. In the past few weeks, Treasury yields seem less influenced by macro-economic news than the underlying fundamental long term “secular outlook”. However, watch for retail sales to be closely watched as the holiday shopping season starts. Note that this year retailers are hoping the season starts “well before Black Friday” especially with Thanksgiving so late in the month. CMBS spreads also have been settling in, with 10 year AAAs in the “mid 80s” up about 10-15 bps from the 2014 lows, corresponding new loans pricing in the 200-205 range. Spread between AAAs and new loans widened slightly this year based on further widening in the lower classes, risk retention, etc. …..stay tuned…. David R. Pascale, Jr.

FINfacts Newsletter XXI-43

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