GSPartners
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Volume XXIII | No. 22 | June 10, 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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1.79%
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5 Yr Swaps
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1.88%
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12-MAT
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0.17%
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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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2.49%
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10 Yr Swaps
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2.52%
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11th Dist COFI
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0.68%
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6 Month LIBOR
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0.42%
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30 Yr US Treasury
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3.22%
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| | George Smith Partners, Inc. Celebrates the Addition of Three New Principals | GSP is proud to introduce Bryan Shaffer, Jonathan Lee and Shahin Yazdi as new principals to our growing firm. Each of these gentlemen brings proven leadership and tenacity to the current team of principals. Lee and Yazdi joined the firm approximately 10 years ago as analysts and have since risen to their current position of Principal. Mr. Shaffer came to GSP four years ago from the principal side of the industry and brings his decades of ownership experience to the firm. Please join us in celebrating these three successful individuals and their continued commitment to George Smith Partners, Inc. | | | | Transaction Description: | | $14,500,000 Multi-Family Construction Financing to 80% of Cost Jonathan Lee arranged the ground-up construction financing for a 65 unit multi-family site in the Koreatown neighborhood of Los Angeles, California. Sized to 80% of cost, the 20 month loan is priced at LIBOR + 2.65%, netting an all-in coupon of less than 3.0% today. Recourse is limited to the top 25% of the loan. |
Challenge: There has been little recent construction in this market since the last real estate cycle; challenging sale comparables and rental market demand. Leasing demand and rental rates for high-quality residential could not be documented in this area. |
Solution: Strong location metrics; access to transit, hiring velocity in local employment sectors and neighborhood entertainment drivers were major contributors to the lender narrative. Ultimately, the capital provider was comfortable with the sell-out analysis, and provided the full 80% of cost commitment. |
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| | | Transaction Description: | | $8,775,000 Acquisition and Bridge Financing on Four Central California Coast Retail & Office Buildings Shahin Yazdi successfully sourced the acquisition debt of four retail/office properties in Carmel, California, totaling 11 commercial units measuring 22,000 square feet. None of the occupants provide credit leases. One-third of the subject was vacant at close and at a 0.70 DCR, was unable to support operations or service debt. The asset was mismanaged to such an extent that there had been no reimbursable expenses collected over the prior 5 years. Several tenants were on month-to-month leases or leases set to expire before the end of this five-year loan term. The Borrower’s past operating and rehabilitation history allowed the lender to become comfortable with the business plan, and Mr. Yazdi structured a loan that suited both client and lender. Sized to 65% of the total project cost, the loan is variable for 5 years at WSJ Prime + 0.50% with a 4.50% floor and a lifetime cap of 7.50%. The loan is interest only for the first 2 years and amortizes thereafter on a 25 year amortization schedule. There is no prepayment penalty or cash management aspect. Property improvement and releasing funds are deposited into an account that is completely controlled by our Borrower, allowing them to reposition the property without any delays due to fund control restrictions. An 18 month interest reserve was posted by the Borrower in addition to his top-end 10% repayment guarantee. |
| | Rate: Prime+0.50% | | Term: 5 Years | | Amort: 2 Years IO then 25 Years Thereafter | | LTC: 65% | | Advisor: Shahin Yazdi |
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| | | Transaction Description: | | $5,500,000 San Diego Quick Close Bridge Loan to Acquire a Vacant Historic Beach Restaurant/Bar Out of Bankruptcy Poor management and the economic downturn led an iconic San Diego Bar and Restaurant into bankruptcy. The bankruptcy court would only consider quick close, all cash offers to liquidate the real estate. The existing lender was also trying to obtain relief from stay and foreclose. For the project to be successful, an experienced restaurateur with vast market experience and access to immediate cash would be required to take this out of bankruptcy to stabilization. With amply experience working through bankruptcy courts, Mr. Shaffer assisted his client with the bankruptcy laws and developed a capital solution that enabled a quick close, 6 month, acquisition loan that funded in 10 days of the judge’s order. The bridge loan provided 70% of the purchase price at an 8.6% interest only rate. |
Challenge: In addition to the timing as mandated by the bankruptcy court, there was no in-place cash flow, significant deferred maintenance and code issues for this special purpose single tenant asset. Certainty of execution was required for this non-operating restaurant in order to preserve the Borrowers’ cash deposit. |
Solution: Understanding the challenges of the bankruptcy, GSP quickly demonstrated the intrinsic value of the land as well as the experience and skills of the Sponsors. The primary focus was placed on the sales value of the asset and not the potential cash flow. Our Sponsor had recently achieved a 500% return on a prior transaction in this market for an asset acquired out of bankruptcy. |
| | Rate: 8.6% | | Term: 6 Months+One - 6 Month Option | | Amort: Interest Only | | Prepayment: None | | Non-recourse | | Advisors: Bryan Shaffer, Jon Shapiro |
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| | | | LifeCo Debt from $5,000,000 George Smith Partners is securing small balance termsheets from a direct Life Insurance Capital provider. Transactions from $5,000,000 to $60,000,000 are underwritten to 65% of value to 75% for quality multifamily on a national basis. Coupons start in the mid-3s priced at par for the 30 year amortized transactions with 10 year balloons. Step-down prepayments may be structured for additional yield.
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| | | 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 | | | George Smith Partners’ Paid Internship Program | We are now accepting applications for our summer 2015 Rotational Analyst Intern Program. This competitive internship is a paid position lasting 4 months. Analyst interns are exposed to all facets of real estate investment banking and will be evaluated for the possibility of a permanent position at the firm. Please send your cover letter and resume to resume@gspartners.com by June 20th. | | | Pascale's Perspective | Is This Interest Rate “Normalization”? Or another “speedbump”? The 10 year Treasury auction today featured solid demand, with the yield hitting 2.46% with the index briefly nearing 2.50%. This puts the 10 year Swap at about 2.60%. Why? (1) Continued positive economic reports, the JOLTS report (Job Openings and Labor Turnover Survey) indicated spikes in jobs available (15 year high) and workers quitting jobs. Fed Chair Yellen is known to be a close watcher of this report and many interpret these spikes as symptomatic of a robust job market. It shows workers are confident enough to quit and look for a new job and employers may have to “up the ante” to attract workers, wage inflation is considered a key element in the Fed’s rate increase decision. This is on the heels of May’s strong jobs report; (2) The dollar may have peaked against other currencies, this helped the stock market rally today as a cheaper dollar helps US exports, but it weakens demand for dollar denominated US Treasuries; (3) Europe – the recent inflationary indications and global bond selloff pushed the 10 year German yield above 1.00%. Also, another Greek debt extension is near (kicking the can or solving the problem? There is no sense of immediate panic for investors to rush into Treasuries). Consensus now is the Fed will raise twice this year, September and December. The next key technical level is 2.55% on the 10 year. This puts new CMBS 10 year loan rates at about 4.50%, still historically low but moving up…..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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