GSPartners
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Volume XXIII | No. 23 | June 17, 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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0.19%
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5 Yr US Treasury
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1.63%
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5 Yr Swaps
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1.76%
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12-MAT
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0.17%
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3 Month LIBOR
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0.29%
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10 Yr US Treasury
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2.32%
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10 Yr Swaps
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2.40%
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11th Dist COFI
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0.68%
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6 Month LIBOR
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0.44%
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30 Yr US Treasury
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3.01%
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| | | Transaction Description: | | 25,000,000 Joint Venture Equity Finance, “For-Sale Townhomes” GSP secured the $25,000,000 Joint Venture Equity finance for the ground-up development of a luxury 168- Unit Dana Point Luxury Townhome project. Malcolm Davies developed an ‘Equity Introduction Program’ to marry the needs of sponsors requiring equity capital with investors prior to a ‘pre-identified’ project to lay groundwork and help mold a mutually agreeable platform. The program objective is to expedite the ‘chase to equity’ on a project level once the asset has been identified. Equity relationships inherently take time to mature. This is the 2nd successful project this particular group has provided capital for this Sponsor. Terms are confidential. |
Challenge: Our sponsorship had a very short escrow period to acquire the development site. The purchase included entitlements for the construction of a 168-Townhome community property. |
Solution: The prior relationship established allowed the Sponsorship to quickly secure the equity and provide the needed capital for the Developer’s luxury townhome project. The new Joint Venture provided all of the needed equity capital for this development opportunity. |
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| | | Transaction Description: | | $3,828,500 Acquisition Financing for 48 Unit Los Angeles Brick Apartment Building Shahin Yazdi placed the non-recourse acquisition debt for the purchase of a 48 unit brick apartment building in the Koreatown neighborhood of Los Angeles. The loan was sized to 65% Loan-to-Purchase, fixed for 5 years at 3.825% before floating for the remainder of the 10 year term at 6 Month LIBOR + 2.40%. Mr. Yazdi was able to secure 3 years of interest only prior to amortizing over 30 years. A step down prepayment penalty exists for only the first 2 years of the loan; 2% in Year 1 and 1% in year 2, and then opens without penalty. |
| | Rate: 3.825% | | Term: 10 Years | | Amort: 3 Years IO; 30 Years Thereafter | | LTV: 65% | | DCR: 1.20 | | Prepayment: 2,1,0 | | Non-recourse | | Lender Fee: Par | | Advisor: Shahin Yazdi |
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| | | Transaction Description: | | Southern California Car Sales Lot Acquisition George Smith Partners successfully placed the acquisition financing for the purchase of a net-leased automobile sales lot in Southern California. Most capital providers avoid auto related uses due to environmental concerns and the land to improved ratio – the subject is 30% improved compared to the lot size. GSP identified a regional lender who understands auto-use and the underlying land value, and was comfortable underwriting the NNN lease. Sized to 60% of purchase and fixed for five years at 4.75%, the 10 year term amortizes over 20 years for this recourse loan. |
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| | | | Large Non-Recourse Construction Debt to 90% of Cost George Smith Partners has identified a national lender providing senior and mezzanine ground-up construction debt to 90% of cost staring at $50,000,000. Focusing on industrial and retail developments in the top 12 MSAs, pricing on the senior tranche starts at LIBOR plus 4.25% to 60% of cost. A 30% mezzanine slice priced at 14% fixed from the same capital provider can be layered to provide up to 90% of the overall capital stack. This attains a blended cost of capital of 7.0% for Borrowers. Fully speculative industrial and pre-leased retail developments will be considered, with a loan structure that protects the Borrower from negative arbitrage on both tranches of capital. |
| | | 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 22nd. | | | In The Press | Congratulations to Jonathan Lee who was featured in GlobeSt for his role in completing three construction loans totaling $30,700,000. The loans will fund construction of three separate development projects; one for-rent apartment community and two for-sale condo communities. The article discusses Lee’s insight into the multi-family market, indicating that banks prefer rental apartments over condos. Read the full article on-line here. | | | Pascale’s Perspective | Treasuries Rally on Fed Meeting…..Credit spreads widen on Greece fears….. As recently as early this year, the June Fed meeting was pegged as the “liftoff”, ie the first rate increase in nearly a decade. Today saw the Fed continue to prepare investors for a rate increase sometime this year, most likely September (Yellen said rhetorically “whether it is September or December or March” seemingly taking a July increase off the table). Other takeaways from the statement and subsequent press conference by Fed Chair Yellen: (1) The Fed will not be deterred in their rate increases by “market tantrums”, ie the raises will be data driven; (2) Yellen does not appreciate IMF head Christine Lagarde dictating when The Fed should raise rates (Lagarde said wait until 2016); (3) She believes that consumer spending has rebounded from the winter slump, she’s not convinced that consumers are permanently more cautious since the financial crisis (important point in our consumer driven economy); (4) The 2004-2006 pattern of quarter point hikes at every meeting will NOT be followed, most likely a quarter point every OTHER meeting, meaning we are a long way from the “normalization target” rate of about 3.5%, which won’t be reached until after 2017 at that pace…. Treasuries rallied immediately after the news, with the 10 year T yield dropping from 2.39% to 2.31% in about an hour. CMBS/Credit spreads – Last week CMBS AAA bonds widened about 5-7 bps (from approx. Swap + 87 to 92). As one CMBS originator remarked, “Greece is the word”. The June 30 Greek deadline to negotiate new terms is looking very tight. Last week’s rumored “near agreement” has degenerated into some very confrontational rhetoric. Bond yields are “adjusting” with Spanish and Italian yields now higher than the US (it was surprising that it took this long). Credit spreads are widening on the uncertainty, but not as much as the major disruptions of 2010-2011. More remarks on CMBS – Pool sizes are smaller as originators want to increase velocity and not hold product too long” and “This feels like August already” (aka “Hamptons effect” the traditional slow period which sometimes sees spread widening as big market players vacation). ……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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