GSPartners
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Volume XXIII | No. 5 | February 11, 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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1.53%
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5 Yr Swaps
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1.69%
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12-MAT
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0.13%
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3 Month LIBOR
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0.25%
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10 Yr US Treasury
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2.00%
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10 Yr Swaps
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2.13%
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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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2.57%
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| | | Transaction Description: | | $11,700,000 High Leverage Refinance of Grocery-Anchored Retail Center in Tertiary Texas Market GSP successfully placed $11,700,000 in first mortgage bridge debt on a 1980’s vintage, 88% occupied grocery anchored community shopping center in a Texas college town. The 46,000 square foot grocery anchor has been in occupancy at the property since 1981. The anchor is currently on a one year option with an additional one year option and subsequent five year option to follow, all at below market fixed rents. The short lease terms were negotiated to accommodate a planned expansion by the grocer, however the grocer made a corporate decision not to expand shortly before Borrower’s existing debt was maturing. Borrower requested high leverage financing with the ability to make future capital draws in order to a) pay down maturing debt and b) fund renovations if the grocery anchor vacates. The non-recourse loan was sized to 80% of “As-Is” value, priced at L+5.65%. |
Challenge: The grocer lease structure makes the deal a “tweener”. Because of the fixed extension options at low rents the grocer could elect to remain at the property, which rendered the transaction ineligible for most bridge/transitional lenders. Permanent financing was not attainable given the short term remaining on the grocer lease coupled with their recent decision not to expand. |
Solution: GSP identified a capital source that provided a bridge financing structure with future fundings modified depending on the grocer’s renewal decisions. 80% of the As-Is property value was funded at loan closing, with an additional funding of up to $2,250,000 allocated to fund 100% of potential retenanting/renovation costs. Although the additional capital is underwritten and committed, interest is not paid on the future funding until disbursed and there is no “forced funding” date. |
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| | | Transaction Description: | | $8,000,000 Multifamily Acquisition to 75% of Purchase George Smith Partners successfully placed the 75% of purchase for the acquisition of a three-property portfolio in Milwaukee suburbs. This purchase facilitated the tax deferment of a 1031 exchange. Although the seller was related for each asset, he/they were not identical and necessitated the need for three concurrent escrows. The new debt is collateralized as one loan to a single SPE Borrower. Indexes tumbled just prior to rate-lock. GSP negotiated a ten-year rate 15 basis points below the applied for floor. Fixed for 10 years at 4.25%, the loan is interest only for the first two years before amortizing over a 30 year schedule. |
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| | | Transaction Description: | | $1,400,000 San Fernando Valley Office Refinance Jason Gaffner successfully arranged the refinance of an owner-occupied office building in the San Fernando Valley. This transaction replaced a short-term, interest only, seller carry-back note provided when the asset was purchased 7 years ago. A favorable appraisal valuation as supported by a strong sub-market allowed for the loan to be sized to 75% of value. Fixed for 5 years at 3.68%, treasury yields decreased 34 basis points from application to funding with the Sponsor obtaining the full benefit of this movement. |
| | Rate: 3.68% | | Term: 5 Years | | Amort: 25 Years | | LTV: 75% | | Prepayment: 3,2,1,1,1 | | Recourse | | Lender Fee: 0.25% | | Advisor: Jason Gaffner |
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| | | | Bridge Debt is Prominent at MBA Bridge/Reposition Capital flooded this year’s Mortgage Bankers Convention in San Diego as new platforms emerged from heretofore stabilized capital providers. Programs run a wide gamut from extensive use conversion to “bridge light”, funding proceeds limited to tenant improvements. Rates and terms vary based on risk and level of rehabilitation although non-recourse opportunities to 80% of total cost are readily available at institutional single-digit yields. Traditionally transactions under $5,000,000 have been limited to regional recourse capital providers although several debt funds are now dipping down to $2,000,000 for national non-recourse product. |
| | | 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 | Stars to Watch – Malcolm Davies - The February issue of Commercial Property Executive named GSP Principal Malcolm Davies as one of the Stars to Watch in 2015. Malcolm is one of 17 individuals nationally showcased for this recognition. Mr. Davies’ accomplishments are summarized and available in the on-line article | | | Pascale’s Perspective |
2015 MBA Convention Report… 2015 Mortgage Bankers Association Commercial Real Estate Finance Convention (MBA CREF) was the highest attended of recent years. We at GSP met with over 100 capital providers including formal presentations in our meeting room, visits to lender gatherings, individual meetings, etc…. The upshot? Lots of capital available throughout the stack. Trends include (1) Capital providers offering multiple platforms (such as bridge, mezzanine, perm); (2) Lenders are bracing for the massive wave of maturities in 2015-2017. As those loans were originated at peak valuations and often included aggressive underwriting, full term interest only, etc, multiple mezzanine lenders are preparing to help borrowers hit the necessary proceeds; (3) CLOs are back (Collateralized Loan Obligations). Unlike the prior CDOs which included non-real estate debt (such as auto loans, low rated tranches of other pools), the CLOs are all commercial real estate loans. Secondary market buyers are reacting favorably to the “transparency”, and therefore providing bridge lenders with more capital for non-recourse floating rate loans, (4) “Dequity” ie; high leverage debt that acts as “cheap equity”; (5) CMBS: Several new entrants (with large balance sheets) into an already crowded field, spurring everyone to compete on terms; (6) Foreign banks getting aggressive again and domestic lenders lending to foreign nationals….. When considering loan requests, larger continues to garner more attention as more capital and capital providers enter the market in anticipation of ballooning debt …. 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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