GSPartners
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Volume XXIII | No. 4 | January 28, 2015
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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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0.17%
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5 Yr US Treasury
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1.24%
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5 Yr Swaps
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1.39%
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12-MAT
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0.12%
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3 Month LIBOR
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0.26%
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10 Yr US Treasury
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1.72%
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10 Yr Swaps
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1.85%
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11th Dist COFI
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0.69%
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6 Month LIBOR
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0.36%
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30 Yr US Treasury
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2.29%
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| | | Transaction Description: | | $32,250,000 High Leveraged Bridge Loan of Multi-State Apartment Portfolio Bryan Shaffer successfully placed the $32,250,000 senior bridge loan for the refinance of a two property 397 unit multifamily apartment portfolio for a family trust. The highly leveraged loan took debt coverage to 1.05 and allowed the family trust to pay off ballooning debt and secure over $1,000,000 in rehab dollars. The Sponsor also received a return of equity on his investment. Sized to 85% of current value, the non-recourse debt floats at 5.25% over LIBOR and is interest only for the two year term. |
Challenge: As single stand-alone assets, neither property would qualify for additional debt; one property restricted by debt service coverage and the other having LTV restrictions. |
Solution: GSP mapped out the future upside in the portfolio and developed a plan to structure the assets together as a portfolio, reducing the overall risk of the loan and providing better overall coverage and cash flow for the lender. Monthly cash flow after debt service increased with the lower interest-only payment and the ownership is provided the capital needed to complete the rehab plan and increase the rents on the projects. A self-imposed Borrower capital reserve was funded to absorb market changes until the assets are fully stabilized and will qualify for permanent debt. |
| | Rate: LIBOR + 5.25% | | Term: 2 Years + two 1 Year Options | | Amort: Interest Only | | DCR: 1.05 | | Non-recourse | Advisors: Bryan Shaffer, Jon Shapiro
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| | | Transaction Description: | | Limited Service Hospitality Acquisition to 96% of Purchase Ameet Chagan placed the $4,250,000 acquisition loan for the purchase of a 56 key limited service hotel in California’s’ San Joaquin Valley. The loan represented 96% of the contracted purchase price. Our Sponsor entered into a management contract five years ago with an option to acquire the distressed hotel at the face value of the note. Sized to 70% of “as-is” value, the non-recourse loan is fixed for five years at 5.625% and amortizes over 25 years. |
Challenge: With the insertion of the new operating manager, the prior lender consented to a loan extension on an interest-only basis to avoid a default. With no opportunity for a short-pay, our Sponsor had a finite window to exercise his purchase option and prevent the foreclosure. Although a strong operator, the Sponsor lacked the traditional 30% cash down-payment required for a hospitality purchase. The tertiary market and sub-$5,000,000 loan request ruled out most debt funds. |
Solution: GSP worked with a lender with familiarity in hospitality who had completed several structured finance transactions with GSP in recent months. GSP documented the tremendous value added to the property by our Client and gave credit for cash re-invested out of operating cash flow after debt service, in addition to the fresh cash equity added to this purchase escrow. Strong market fundamentals and a comparatively low loan per key, off-set tertiary location concerns. A new nationally recognized flag added further support to the Borrowers’ cash flow projections as operating cash flow more than doubled since the execution of the purchase option. The 12 month trailing debt yield exceeded 12% at the time of funding. |
| | Rate: 5.625% | | Term: 5 Years | | Amort: 25 Years | | LTV: 70% | | LTC: 96% | | Non-recourse | | Lender Fee: Par | | Advisor: Ameet Chagan |
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| | | Transaction Description: | | $4,815,000 Cash-Out Refinance of a Seniors Apartment Property Fixed for 12 Years GSP successfully placed the $4,815,000 cash-out refinance on a 108 unit senior multi-family apartment complex, which has been owned by the sponsors for 10 years. The property was built in 2000 and shows well in this Pacific Southwest market. It is currently 97% occupied, thus qualifying for a significant return of capital to the Sponsor. The 4.37% non-recourse loan is fixed for 12 years and sized to 65% LTV over a 30 year amortization schedule. The 12 year fixed loan allowed lender to underwrite on the actual loan constant instead of an artificial underwriting constant. This innovative structure allowed for more loan proceeds. |
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| | | | Non-Recourse Floating Debt from L+200; 2.17% Today GSP identified a national portfolio capital provider providing floating rate debt from $15,000,000 to $50,000,000 on Class A & B assets in core locations. Non-Recourse pricing starts at 200 basis points over LIBOR, floored at the start rate when funded. Debt coverage must be above 1.0 at close, limited by a 7% debt-yield going-in. Terms range from 2 to 5 years with flexible prepayment structured on a case-by-case basis. |
| | | 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 | Co-Founding Principal Steve Bram will be instructing a class as part of the ICSC Executive Education Program in Santa Monica next Wednesday. Mr. Bram will also be participating as a guest instructor for an undergraduate real estate class at UCLA later that day. Please contact Shannon Bradley for speaking engagement availability. | | | Pascale’s Perspective | Birds: Dove or Hawk? Fed Statement may be dovish, may be hawkish, may be neutral. Treasury Yields continue to fall. Greece “containment”? The Fed’s first 2015 meeting and subsequent statement seemed to indicate that they are still on schedule to raise rates later this year. The statement referenced “solid” growth and “strong” job gains (even after Monday’s surprisingly negative US Manufacturing Report). However, market watchers feel that the raising may come in the fall and not mid-year as consensus forecasted last month. Treasury yields continued to drop, the 10 year closed at 1.72% today, its lowest level since May 2013. The 30 year is at an all-time low of 2.29%. The bond yields are hitting key technical levels, so we are in uncharted territory. The Fed referred to inflation factors such as plunging oil prices as “transitory” (what do they know that we don’t?). It will be hard to raise rates if anything like deflation is on the horizon. European yields are still very low in the wake of the ECB’s bigger than expected and semi open ended stimulus announcement last week. German 10 year yield is 0.35% but developments in Greece are pushing Italian and Spanish yields up slightly. The hope is that Greece’s potential challenges can be contained, that “firewall” measures put into place since the last Greek crisis are enough to prevent contagion to other potentially unstable southern European economies. Meanwhile US real estate lenders are still trying to figure out floors. CMBS lenders are still close to 4.00% on full leverage, but pricing lower leverage in the mid 3’s…. with life companies going to 3.50% and below for very low leverage on high quality assets. …stay tuned… David R. Pascale, Jr. |
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©2015 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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