GSPartners
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Volume XXIII | No. 39 | October 14, 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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1.27%
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5 Yr Swaps
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1.33%
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12-MAT
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0.24%
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3 Month LIBOR
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0.32%
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10 Yr US Treasury
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1.65%
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10 Yr Swaps
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1.97%
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11th Dist COFI
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0.64%
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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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2.83%
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| | | Transaction Description: | | $7,650,000 Non-Recourse Pre-Development for 228-Unit Southern California Multifamily GSP successfully placed $7,650,000 of non-recourse pre-development debt for a luxury 228-Unit Multifamily Community in Santa Ana, California. Located at the termination of the newly planned Guideway Light Rail Station, this location will offer direct access to downtown Los Angeles via light rail. Loan proceeds will allow the sponsor to complete construction drawing's while locking in costs for vertical development. Sized to 70% of current appraised value, the 12 month term is fixed at 12%. |
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| | | Transaction Description: | | $4,176,250 Bridge/Acquisition for Un-Anchored Retail Center GSP placed the $4,176,250 bridge loan for the acquisition of a 23,494 square foot retail center in Santa Clarita, California. Although located on a heavy trafficked corner, the Subject was only 70% occupied at close. Sized to 65% of the purchase price, the 7-year loan floats over WSJ Prime + 0.50% with a 4.00% floor. There is no prepayment penalty for this reposition loan. |
Challenge: Due to the seller’s mismanagement of the property, the asset was 30% vacant at the time of the acquisition; no historical operating financials were provided. All leases roll over the next 2 years with the largest tenant currently month-to-month term. The purchasing entity was setup using a Tenants In Common (TIC) structure. |
Solution: Our Sponsors’ prior performance and management of distressed retail demonstrated his experience in repositioning distressed retail. Market comparables and operating data provided a supportable budget for underwriting expenses, added support for market strength and mitigate vacancy and short term leases. A personal repayment guarantee off-set the TIC ownership structure concerns. |
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| | | Transaction Description: | | High-Yield Take-Out George Smith Partners arranged the take-out financing of a high-yielding private money loan. Structured as an interest only bridge financing for a 70 unit apartment complex, the non-recourse loan is fixed at 5.81% for two years. Located in the Western US, the mid-1980’s vintage subject was over 95% occupied at funding. This financing replaced high-rate financing from a mid-2014 acquisition. |
Challenge: The property’s operating history since acquisition had been inconsistent as the Borrower replaced an underperforming management company during his restructuring. The new management improved occupancy and collections but lacked stabilized history to qualify for an agency loan for an out of state Borrower. |
Solution: GSP identified a non-recourse bridge lender provided an agency-to-perm option. The fixed rate loan is pre-payable after 12 months and will roll into a long-term agency execution once a stabilized track record is documented. |
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| | | | Five-Year Fixed Rate at 3.85% for Year End Close GSP is closing 5-year, fixed rate loans from $4,000,000 to $10,000,000 at 3.85%. Loans must be funded by year end to obtain the 3.85% interest rate. This portfolio lender will consider core asset classes to 75% LTV for Southern California acquisitions and refinances where there is no return of equity. Special use products including flagged limited service hotels, car washes and gas stations are also underwritten. |
| | | 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 | Fed: Credibility vs. Data….. The Fed seemed to paint themselves into a corner during the last few months as the Chair and various influential members of the FOMC have repeatedly indicated a rate rise this year. There are two meetings left; October and December. An October rate rise is off the table as there is no Economic Projections Summary or a Chair press conference scheduled. The historic first rate rise in over seven years would merit a full Fed commentary and discussion in order for markets to properly context the announcement. So December 2015 has been pegged as liftoff. But, recent US economic reports continue to indicate an inconsistent recovery accompanied by ultra low inflation (September employment reports showed fewer jobs added, today’s PPI numbers were all negative). Furthermore, the September Fed Minutes (remember that was the meeting that a raise was a very real possibility), show the Fed worried about low inflation even with unemployment at 5.1%. Fed’s notes show that the goal of 2% inflation being reached in 2018. Even with the 5.1% full employment number, the Fed is concerned about historic lows in labor participation and very low wage inflation. So the Fed may be looking for some wiggle room to delay the first rise until next year, but risks losing credibility after crying wolf. Treasury markets anticipate no movement until 2016 as today’s 10 year Treasury plunged 9-10 bps to 1.97%. CMBS: The Swap and Treasury are now virtually equal. Pricing widened about 4 bps to about Swap + 245-270 for full leverage 10 year. Coupons are still 4.75% and below. …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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