GSPartners
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Volume XXIII | No. 18 | May 13, 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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0.18%
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5 Yr US Treasury
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1.57%
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5 Yr Swaps
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1.69%
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12-MAT
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0.16%
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3 Month LIBOR
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0.28%
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10 Yr US Treasury
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2.29%
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10 Yr Swaps
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2.33%
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11th Dist COFI
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0.69%
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6 Month LIBOR
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0.41%
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30 Yr US Treasury
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3.09%
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| | | Transaction Description: | | $22,000,000 Acquisition of a Newly Constructed Los Angeles Retail Center to 90% of Purchase George Smith Partners successfully arranged the $22,000,000 non-recourse acquisition debt for the purchase of a newly constructed CVS and a non-credit grocery anchored retail center in South Central Los Angeles. The loan underwrote for 90% of the purchase price but appraised for 76% of value. Final lender loan approval was obtained within 45 days of application. Fixed at 4.187% for 10 years, the loan amortizes over 30 years after an initial two years of interest only. |
Challenge: The ownership structure included two Tennant-In-Common (TIC) investors inclusive of a Non-Profit organization who would also serve as property manager post close. The non-profit lacks commercial real estate management experience. Mezzanine Debt and/or Pref Equity was not acceptable to the Sponsor in securing the highest capitalization possible. The at-close debt yield of 7.24% is below most lenders’ minimum thresholds. The City of Los Angeles has a Section 108 loan, although subordinated, is recorded on title. This encumbrance carries full foreclosure rights. |
Solution: The capital provider agreed to underwrite a two-borrower TIC structure as part of their due diligence. They also agreed to have the Non-Profit maintain the management rights as long as our sponsor would oversee all their actions. Placed under contract for sale 10 years ago, the asset appreciated significantly over time. The lender agreed to give consideration for the appreciation and underwrote a 76% of value, not to exceed 90% of the acquisition price under a traditional debt structure without layering on mezz/pref equity. Near term contractual fixed rent increases allowed for a lower debt yield to be underwritten. A Letter of Credit was collateralized by the lender to off-set the recorded city Section 108 loan until it burns off in the next seven years. The Letter of Credit will step-down as the Section 108 loan amortizes. |
| | Rate: 4.187% | | Term: 10 Years | | Amort: 2 Years IO; 30 Years Thereafter | | LTV: 76% | | LTC: 90% | | DCR: 1.22 | | Prepayment: Defeasance | | Non-recourse | | Lender Fee: Par | | Advisor: Shahin Yazdi |
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| | | Transaction Description: | | $6,450,000 Single Resident Occupancy (SRO) Rehab GSP successfully placed the refinance of a partially occupied SRO property in the heart of Los Angeles. SROs are dorm style multifamily with some shared bathrooms and no kitchens inside individual units. Funds are allocated to complete the rehabilitation of the subject property and complete lease-up beyond the current break-even coverage. Fixed at 7.9%, the 12 month non-recourse loan does not carry a prepayment penalty or exit fee. |
| | Rate: 7.9% | | Term: 1 Year w/one - 6 Month Option | | Amort: Interest Only | | Non-recourse | | Lender Fee: 1 Point | | Advisors: Bryan Shaffer, Jon Shapiro |
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| | | Transaction Description: | | $4,500,000 Quick Close Cash-Out Body Shop Refinance George Smith Partners successfully placed the cash-out refinance loan for an owner/user Body Shop and Service Center. The prior loan was ballooning with no opportunity for an extension. As with most auto-related uses, institutional lenders could not become comfortable with the environmental exposure. The Sponsor requested additional proceeds beyond the current lien to satisfy unrelated real estate payables. GSP identified a private party who was comfortable with the site operations and concern for environmental containment as well as the financial strength of the loan guarantor to mitigate future concerns. A Phase II report was not required for funding. This loan funded in 20 days from application. Priced at 11% and two points, the two year term is interest only and does not require a prepayment penalty or exit fee. |
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| | | | National Bridge Debt up to 85% Loan-to-Cost GSP is placing non-recourse bridge transactions from $5,000,000 to $25,000,000 to 85% of cost on a national level. With an open prepay and future funding of good news proceeds, pricing starts at 4.75% over LIBOR plus one point origination and ½ point exit. Targeted asset classes include core products, hospitality, entitled land, and vacant buildings. |
| | | 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 | | | | Pascale’s Perspective | “Solid” Demand for 10 year Treasury Calms Markets This week saw some heavy volatility in Treasury markets; the 10 year T hit a high of 2.37% on Tuesday before rebounding to 2.15% yesterday. The volatility stems from some breaks in key technical levels, lack of liquidity in the trading system (due to Dodd Frank regulations on Banks), large corporate issuance (many companies sell Treasuries when they issue new bonds as part of their overall hedging). Today’s $24 billion auction of new 10 year Treasuries was well subscribed, lots of foreign bank buyers, the yield went off at 2.24% with a close today of 2.29%. However, the volatility and major sell off in worldwide government debt has investors wondering if “the market may not wait for the Fed”, noting that the Fed has absolute control of floating rates with fixed rates set by the market, but often influenced by Fed’s statements. CMBS: AAA’s have been trading in a tight range over the past few months, now at SWAPs+87 bpts with new full leverage loans pricing at SWAPs+210, give or take based on product type and quality. All-In 10 year rates are in the 4.50%/4.60% range. …..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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