FINFacts March 30, 2011

Dear Friends:   I'm pleased to announce that I've joined George Smith Partners, the preeminent real estate investment banking firm in the Western United States.   At GSP, we specialize in securing equity and debt capital for our real estate investor, owner and developer clients and assisting them in underwriting and funding their projects. Our process provides our clients with the best overall financing solutions for new acquisitions, re-financings or recapitulations. Additionally, in the current market, we have been able to bring new capital to troubled borrowers, provide REO lines of credit and provide financing for note purchases. The firm has experience in every asset type and has recently completed multi-family apartment, retail, office, industrial and hotel projects as well as some specialty transactions involving medical office buildings and student housing projects.    As we enter the recovery phase of the financial crisis, capital providers and underwriting standards have changed dramatically. I am someone who spent a large part of my career working for institutional owners and developers, and I have found that it is critical in today's market to fully explore the entire capital market. GSP's unique process plus our long term relationships with country's leading providers of equity and debt capital along with our seasoned team of underwriters and investment banking professionals provides our clients with the tools they need to take advantage of improving market conditions and new opportunities.    In the past, as a client, I was able to experience the firm's proficiency in the loan process and was impressed by the ability to access capital from Wall Street, CMBS Trust, Private Equity Funds, Hedge Funds, Family Offices, Insurance Companies as well as Cross Border, National and Local Banks.   I would like to help you understand the current loan rates, market changes, capital stack, joint venture opportunities and how the GSP process can benefit you. I look forward to speaking with you soon.   Attached to this e-mail you will find a copy of FINfacts, GSP's weekly newsletter. I hope you find it to be of interest.  Please also take a moment to join the George Smith Partners Linked In Group at GSP Linked In   Very truly yours,     Bryan Shaffer  George Smith Partners | Real Estate Investment Bankers Direct: 310.867.2906 | Cell:  310.270.6328 Fax: 310.557.1276 BShaffer@gspartners.com  | www.GSPartners.com MGM Tower | 10250 Constellation Blvd., Suite 2700 | Los Angeles, CA 90067 California DRE License: 01073455

Volume XIX  |  No. 12  |  March 30, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.29% 5 Yr US Treasury  2.21% 5 Yr Swaps  2.39% 12-MAT  0.31% 3 Month LIBOR  0.42% 10 Yr US Treasury  3.47% 10 Yr Swaps  3.54% 11th Dist COFI  1.48% 6 Month LIBOR  0.56% 30 Yr US Treasury  4.52%

Transactions of the Week Transaction Description: 30-year self-amortized, cash-out refinance on a 12-Unit Student Apartment. GSP arranged the cash-out refinance of a stabilized apartment building in Isla Vista, CA. All 12 units are leased to students from UC Santa Barbara. Our client requested a return of equity in this transaction. Challenge: 1) Our client did not have liquidity or a secondary source of repayment beyond the cash flow of the subject property - two critical underwriting criteria. 2) The lender required market rents from non-student populated apartments in their cash flow assumptions. As Isla Vista is heavily concentrated with a large student population, the appraiser was forced to go outside of the market to obtain rental comps. Most of the comps used commanded a lower rent due to less demand and an inferior location. Solution: 1) The lender became comfortable with the asset strengths to compensate for the borrower weaknesses. The consistent historical cash flow and superior property location mitigated the requirement for secondary source of repayment. 2) GSP contacted prominent management companies in the area to identify rental comps closer to what the subject property had been collecting. These comps allowed the appraiser to justify a higher gross rental potential for non-student rentals. Rate: 5.71% fixed for 5 years Term: 30 years Amort: 30 years LTV: 60% DCR: 1.40 Recourse Broker: Shahin Yazdi Transaction Description: $2,451,000 and $1,042,000 Permanent Cash-Out Financing for 2 Multifamily Properties in Burbank and Los Angeles, CA. GSP successfully arranged the refinance of two apartment buildings in Burbank and Los Angeles for the same borrower. The properties were not crossed. Pacific Crest Realty, led by Mr. Dan Tenenbaum, requested a 10 year fixed term on the larger asset and a 7 year term on the smaller loan, to accommodate their long-term ownership strategy. Challenge: The ownership is comprised of entirely non-US citizens and given their long ownership history, were seeking a return of equity. Only the managing member, a minority owner in the LLC was available to execute the carve-outs. Finally, the appraiser concluded actual rents were above the market and threatened proceeds. Solution: GSP was able document excellent asset management and a substantial long-term hold with consistent cash flow in order to circumvent the citizenship and cash out issues. GSP also proved through market comparables, an increase in rental asking rates and compression of operating expenses. Loan: $2,451,000 Rate: 5.61% Term: 10 years Amortization: 30 years LTV: 72% Loan: $1,042,000 Rate: 6.00% Term: 7 years Amortization: 30 years LTV: 73% Non-Recourse Brokers:  Steve Bram, Jonathan Lee Join Us On LinkedIn George Smith Partners is now on LinkedIn.  Click here to join the George Smith Partners Group and gain access to current commercial real estate topics and conversation. Hot Money Joint Venture Equity for Value-Add Acquisitions.  A California based real estate fund manager is seeking to invest their remaining $95,000,000 of capital in 2011 with strong operating partners.  The firm will joint venture on retail, industrial, apartment or office products in major MSAs on a national level.  Total capitalizations should be from $20,000,000 to $60,000,000.  Larger projects and secondary markets will be considered on a select basis.  Existing vacant properties or adaptive reuse potential are of interest - no ground-up construction is currently available.  The firm provides pari passu JV equity with structures having co-invests as small as 5%, preferred returns as low as 9% and as much as 50% profit participation above a high-teens IRR. Hot Money Portfolio West Coast Industrial Lender A regional West Coast lender is looking to expand their industrial portfolio and will "structure to suit" to the borrowers' requirements. This on-book program will advance from $1,000,000 to $10,000,000 on stabilized industrial assets located on the West Coast to 75% LTV on purchases and refinances. No reserves or impounds will be collected with a personal repayment guarantee. Non-recourse debt is also available for a 15 bpt increase in rate. All fixed rate terms carry a step-down prepayment and 30 year amortization for newer assets. No legal, survey, seismic or SPE borrower is required. Three year fixed rate coupons start as low as 4.55%. Transaction Size: $1,000,000 to $10,000,000 Rate: 3 yr 4.55% to 7 yr 5.40% Loan Term: 3, 5, 7 years fixed Amort: 30 Max LTV: 75% Min DCR: 1.25 Recourse Negotiable Property Types: Industrial Prepayment: Step-down Geography: West Coast If you have an inquiry regarding George Smith Partners' commercial real estate financing, asset sales or advisory services, please contact your GSP representative or Todd August, Chief Operating Officer at (310) 867-2995 or TAugust@GSPartners.com Pascale's Perspective Treasuries/Fed:  Continuing evidence of a recovery in jobs and spending (excluding housing) has The Fed discussing when to drop the " extremely accommodative policy", ie the rock bottom interest rates.  The latest consensus is that QE2 will end in June 2011 followed with a rate increase at that time.  The fear of deflation seems to be abating and economic growth/inflation is on tap for the 2nd half of this year.  Interestingly, one Fed governor remarked that the Fed should "start normalizing" rates even if global concerns linger.  CMBS:   Capital markets have calmed down from the twin shocks of Libya unrest and Japan quake.    CMBS spreads actually rallied last week with a new pool's AAA 10 year bonds oversubscribed at Swaps + 125.    This is 25 bps wider than the tightest pricing of late February, but there is still lots of demand.   Some of the widening of recent weeks was in the bid/ask as many investors held onto bonds and most sales were for extraordinary reasons.     So it seems that the capital markets (both public and private) are adjusting to a "new normal" with ongoing uncertainty… David R. Pascale, Jr.

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