GSPartners
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Volume XXIII | No. 28 | July 22, 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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1.67%
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5 Yr Swaps
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1.78%
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12-MAT
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0.18%
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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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2.42%
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11th Dist COFI
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0.69%
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6 Month LIBOR
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0.46%
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30 Yr US Treasury
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3.04%
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| | | Transaction Description: | | $13,000,000 Condominium Construction Financing to 82% of Cost GSP arranged the ground-up construction financing for a 40 unit For-Sale condominium development in the Koreatown sub-market of Los Angeles. Sized to 82% of cost, the total capitalization consists of an $11,800,000 senior bank loan at 75% LTC; and $1,200,000 of preferred equity sourced from a real estate crowdfunding entity. The 75% LTC senior loan is priced at 5.25%, and the preferred equity blended the all-in interest rate to 6.25%. Personal recourse is limited to the senior lender. |
Challenge: There has been little recent condo construction in this market since the last real estate cycle. Demand for high-quality For-Sale housing could not be proven through sale comparables. The Sponsor requested a leverage point above what is typically offered by a single financing source. |
Solution: Market research was conducted to support the economic and demographic fundamentals for the area. Located near restaurants, entertainment and Metro access to major employment centers contributed to anticipated demand. Recent SFR sales and hiring velocity in local employment sectors were major contributors to the narrative. To bridge the capital stack, GSP sourced preferred equity financing from a real estate crowdfunding entity; a pioneering structure that is believed to be the first of its kind for ground-up condominiums. Funding for this portion of the capital stack is sourced online. This project generated a substantial amount of traffic and interest from crowdfunding investors. |
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| | | Transaction Description: | | $10,400,000 Refinancing of Dormitory Style Student Housing in Berkeley California GSP successfully placed the 58% loan to value refinancing for the 118 bed student housing project in Berkeley, California. The dormitory style configuration is positioned over 6,000 square feet of ground floor retail on Telegraph Avenue near the UC Berkeley Campus. Fixed at 3.91% for 10 years, the non-recourse loan carries a 30 year amortization schedule. |
Challenge: Our Sponsors requested a portfolio execution, however the property only had one year of operational history. The dormitory style construction precluded a market tenancy, and the class schedule of the school year yielded multiple months of high vacancy that spiked during the application process. |
Solution: GSP effectively demonstrated the Sponsor’s continually increasing NOI and the strength of the location would continue to be a driving factor for higher occupancy. The vacancy bump during the application process resulted from an unusual non-reoccurring circumstance. |
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| | | Transaction Description: | | $4,665,000 Multifamily Acquisition Jason Gaffner successfully arranged debt financing for the purchase of a 26 unit multifamily property located in the Palms section Los Angeles. Fixed for 5 years at 3.23%, the loan will then float for the remainder of the 30 year term – there is no balloon. The loan was constrained by a 1.15 DCR. The whole coupon was locked at application to mitigate interest rate risk tied to the volatile treasury market. The non-recourse loan allows for a step-down pre-payment penalty from 3% and opens without penalty after the third year of the five year fixed term. |
| | Rate: 3.23% Fixed for 5 Years; L+235 | | Term: 30 Years | | Amort: 30 Years | | LTV: 75% | | DCR: 1.15 | | Prepayment: 3,2,1, open | | Non-recourse | | Lender Fee: Par | | Advisor: Jason Gaffner |
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| | | | Non-Recourse Bridge Debt to 75% of As-Stabilized Value for Commercial Assets GSP is working with a portfolio funder of value-add light transactions from $3,000,000 to $12,000,000 priced at L+600 for three years prior to extensions. Interest is only paid on funds drawn down; there is no negative arbitrage on future funded proceeds. Interest reserves may be established for sub-1.0 cash flow at funding. Sized to the lessor of 75% of cost or stabilized value for commercial assets, this capital provider will extend to 80% of capitalization for multifamily properties. Loan fees are 1 point in and 1 point upon exit. All core assets are considered on a national 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 | | | Pascale’s Perspective | Markets calmer after Greek bailout, Chinese equities stabilize (or stop crashing), Yield curve flattens Markets breathed a sigh of relief as Greece and its creditors came to an agreement and other international market concerns abated (not that everything is “solved”). The focus is back on domestic data. Today’s positive housing reports really helped make the case for Fed tightening, but Apple’s earnings report dampened some optimism. Continuing declines in commodity prices are dampening any expectations of inflation. Shorter term treasury yields are rising (they are more sensitive to potential Fed moves as the Fed rate is a short term rate) while longer term treasury yields are dropping (as they are more sensitive to inflation). The yield curve is as flat as it has been in months. CMBS: The recent market calming has rallied CMBS, but the narrowing of spreads takes longer than the widening, especially as summer wears on and more and more bond buyers are on break. Recent pools (last week and this week) have priced with 10 year AAA’s in the low 100’s with a tough pool pricing near 110. This summer is seeing a huge amount of supply (about $16 billion in July/August), and the market is still not back to April/May levels and may not fully stabilize until after Labor Day. That being said, new 10 year loans are pricing anywhere from 200-240 (the wide range reflects the market choppiness) over SWAPs, so all in coupons around 4.75%. ...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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