GSPartners
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Volume XXIII | No. 33 | August 26, 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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0.20%
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5 Yr US Treasury
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1.49%
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5 Yr Swaps
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1.56%
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12-MAT
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0.19%
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3 Month LIBOR
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0.33%
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10 Yr US Treasury
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2.18%
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10 Yr Swaps
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2.21%
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11th Dist COFI
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0.66%
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6 Month LIBOR
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0.52%
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30 Yr US Treasury
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2.94%
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| | | Transaction Description: | | 83% of Total Project Cost Acquisition & Reposition Financing for a 250-Unit Houston Multifamily Property GSP arranged the $12,940,000 first mortgage on a value-add multifamily asset from a national balance sheet bridge lender. The non-recourse loan provided the borrower 85% of the purchase price plus 70% of future repositioning costs. The three-year term is interest only with two – 1 year options. Priced at LIBOR plus 5.15%, there was a one-point origination fee and ½ point exit. |
Challenge: The appraiser’s proforma property tax expense upon exit was materially greater than the original underwritten tax expense. The resulting appraiser NOI upon stabilization was well below the lender’s acceptable debt yield threshold. |
Solution: By structuring a pari-passu 70/30 (lender/borrower) funding on future advances, proceeds at close were maintained as well as an immediate capital repair despite the reduced underwritten NOI. The balance of the reposition costs will be funded from cash flow after debt service. |
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| | | Transaction Description: | | $8,240,000 Condo Construction Loan for 14 Townhomes GSP successfully placed the $8,240,000, single-phase construction loan to build 14 condominiums in Carlsbad, California. Our Sponsor requested a high-leveraged, quick close execution for this acquisition but lacked sufficient liquidity for most institutional lenders. Private money yields were not palatable due to the strong coastal location. GSP identified a regional bank that mitigated liquidity concerns with the strength of the Sponsor’s development experience and the residential market strength. Structured to 72% of cost, the 18 month loan floats at 0.75% over WSJ Prime with a floor of 5.25%. |
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| | | Transaction Description: | | 60% of Cost Purchase of Unentitled Land Assemblage GSP successfully arranged $1,680,000 for the acquisition of a two parcel assemblage in the Koreatown area of Los Angeles. The Sponsor is purchasing the land with the intention to entitle and build a 53-unit multi-family residential community. Given most capital providers’ standings on unentitled land, our Borrower required certainty of execution with this quick-close purchase. GSP identified a Los Angeles non-institutional fund familiar with this in-fill location and mapped out market trades for unentitled land while providing comps per unit for a traditional construction debt execution exit. Fixed at 8.9% for one year, this recourse loan has two options to extend should the Sponsor be unable to secure his permits with the first year. |
| | Rate: 8.9% | | Term: 12 Months + Options | | Amort: Interest Only | | LTC: 60.0% | | Recourse | | Lender Fee: 1.50% | | Advisors: Jonathan Lee, Adam Candler |
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| | | | Buyer of Non-Controlling Interest GSP identified the purchaser of existing limited interests in commercial real estate nationwide. The underlying asset must be fully stabilized and cash flowing. Yields are risk based on product and location. This fund is fully discretionary, seeking long-term holds up to 50 years and does not securitize or lay-off into the secondary market. Non-managerial positions will be taken in LPs, LLCs, TIC and DSTs. Capitalizations range from $50,000 to $3,500,000. New equity ventures, land, underperforming or non-performing assets are not considered. |
| | | 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 Analyst Rotational Program | GSP is now accepting applications for our Fall 2015 Rotational Analyst Program. Entry-level analysts will rotate through various teams and exposed to all facets of commercial real estate investment banking. This competitive rotational program lasts 20 weeks where analysts will be evaluated for the possibility of a permanent position at the firm. Please forward cover letter and resumes to resume@GSPartners.com by September 12, 2015. | | | Pascale’s Perspective | Volatility Rattles Markets… This week has seen huge market turmoil in worldwide equity, currency, bond and credit markets. The risk off trade is front and center. What is going on? Will this be a great re-pricing of assets? Worldwide central banks have injected massive liquidity into the system in the hopes of spurring inflation of commodities, overall economic growth, lowering unemployment and raising wages. But the results have been massive inflation of financial assets (stocks, government bonds, corporate bonds, derivatives, etc), along with wage stagnation, sputtering inconsistent growth, and commodity deflation. Is this part of the new normal? The plan was that the Fed could slowly raise rates and a handoff would occur whereby the economy would grow on its own. Instead, as we near the inevitable (?) rise in rates, markets are now repricing these assets and the process is sudden and precipitous. The 10 year Treasury whipsawed from 2.20%, down to 1.94% and back up to 2.20% in the past 12 days. What will the Fed do now? NY Fed President Dudley’s highly watched speech today soothed markets as he indicated that the case for the expected September rate rise is less compelling. However, some believe the Fed needs to stick to their guns and show that the Fed is not a slave to the market. CMBS/Credit Spreads: CMBS lenders are still quoting, locking and closing however there is a great deal of uncertainty in the market. No pools are coming to market until after Labor Day (typical for late August). But the late Labor Day this year (Sept 7) leaves just 3 weeks for the market to digest about $12 billion in securitizations. New quotes for full leverage 10 year loans range from Swaps + 210 to 250 with originators indicating that we will see where the market is when it’s time to close. ...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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