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 |  | | Volume XIX | No. 14 | April 13, 2011 | | |
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| KEY RATE INDICES | | Prime Rate | 3.25% | 1 Month LIBOR | 0.22% | 5 Yr US Treasury | 2.19% | 5 Yr Swaps | 2.38% | | 12-MAT | 0.30% | 3 Month LIBOR | 0.28% | 10 Yr US Treasury | 3.48% | 10 Yr Swaps | 3.56% | | 11th Dist COFI | 1.47% | 6 Month LIBOR | 0.44% | 30 Yr US Treasury | 4.55% | | | |
| Transactions of the Week |  | |  | | Transaction Description: | | Cash-Out Refinance for a 50 Key Limited Service Hotel GSP arranged the cash-out refinance of a limited service extended stay hotel in Culver City, California. This fully stabilized hotel maintained consistent cash flow through the economic downturn. |
Challenge: Due to market conditions, hospitality properties are difficult to finance. The borrower also required a return of their initial capital investment and a low mortgage constant to preserve their net cash flow. Several of the investors were only willing to guarantee on a pro-rata basis to their level of investment. |
Solution: GSP was able to demonstrate that the property's consistent occupancy and superior location warranted debt financing for this less-than traditional product type. GSP mitigated the lenders' recourse concerns with the low leverage and length of ownership. The 30 year amortized schedule also provided a low mortgage constant for improved cash flow. | | | Rate: 6.25% fixed for 5 years | | Term: 30 years | | Amort: 30 years | | LTV: 50% | | Recourse | | Broker: Shahin Yazdi | | | |  | | Transaction Description: | | $38,000,000 12-Month Forward Take-Out Commitment for a 50,000 sf Santa Monica Medical Facility GSP obtained a 12-month forward commitment to provide a take-out for the construction debt on a partially-constructed three-story 50,000 sf outpatient surgery facility. The center is pre-leased to an investment-grade tenant. The facility, to be complete in December 2011, features special improvements for imaging and radiation services, a robotic six-floor subterranean parking garage, and LEED Gold certification. |
Challenge: Due to inflation concerns, the borrower wanted to lock-in today's long-term rates - 12 months prior to completing construction. Until recently, forward take-out commitments were constrained to six-months and rate-lock premiums were prohibitive. The building is valued at more than $1,200/sf. |
Solution: GSP solicited conduits, bond issuers, and portfolio lenders (life companies & pension funds) to identify a lender willing to lock rate today for a 12 month forward funding. GSP highlighted the quality of the real estate & borrower, and built a strong case to support the property's high valuation. The Sponsor selected a life company loan at a competitive rate, locked at application in February 2011, with a forward premium of 4 bps per month. The lender was distinguished by their understanding of the location & tenant, their willingness to commit 12 months before funding, and the trusted relationship they developed with GSP and the client. | | | | |  | | | | National HOA Capital Improvement Loan Program A nationwide lender is offering non-recourse property improvement debt to cash flowing Home Owners Associations for capital upgrades. Projects may range from re-sealing the exterior of buildings to the instillation of a new swimming pool. Collateral is the assignment of HOA dues - there are no individual liens and thus no need for partial releases. Loans self-amortize over 10 years upon construction completion. There is no prepayment penalty. Five and 10 year fixed rates are available. | | Transaction Size: $1,000,000 - $5,000,000 | | Rate: 6.0% fixed for 5 years | | Loan Term: 10 years | | Amort: 10 years | | Non-recourse | | Property Types: Condo HOAs | | Prepayment: None | | Fees: Par | | Geography: Nationwide | | | | | Hot Money | Mobile Home Park Portfolio Lender w/$500,000,000 to deploy A Southern California based portfolio lender is aggressively targeting stabilized Mobile Home Parks in Washington, Oregon, California and Texas. They will advance on infill or tertiary locations in their efforts to deploy $500,000,000. Loans are 30 years due in 30 years with fixed rate terms of 3 years to 15 years, then float over LIBOR after the initial term. All prepayments are step-down regardless of the fixed rate term. To 75% on purchases or 70% on cash-out refinances. Loan sizes will range from $1,000,000 to $5,000,000 and will be amortized over 30 years with rates as low as 4.20% fixed for three years.
| | | 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 | Fed Watching.... Next hike in 2011 or 2012? Recent comments by Fed governors such as Janet Yellin indicate that a majority of the FOMC (Federal Open Market Committee) view recent spikes in commodity prices as "transitory." At the same time, unemployment is still unacceptably high by any standard. In Fedspeak: "Accommodative monetary policy continues to be appropriate." In summary, don't look for a rate hike in 2011. Note that there are dissenting voices on the board, it is not unanimous. Futures markets have pegged the January 2012 meeting as the likely first rate hike of the post Great Recession era. The metric that the Fed is using is: What is the relationship between recent devaluation of the US dollar to commodity price hikes? In other words, is Fed policy of low rates and quantitative easing (which devalues the dollar) responsible for price inflation? Recent calculations indicate that supply disruptions (Libya, etc) and the speculation/fear factor are creating much of the price increases. Note that a major investment bank report issued Monday made the same assertion prior to oil prices dropping this week. Bernanake Press Conference? An extraordinary event will occur on April 27th: The Fed Chairman will take questions after the FOMC meeting for the first time in history. This is causing some market unease as it adds an element of uncertainty to the process. Some investors are nervous that remarks regarding the future and/or winding down of quantitative easing may be misinterpreted and roil markets in some way. It is unknown territory which markets never like. Stay tuned..... David R. Pascale, Jr. | | | Speakers Corner | Senior Vice President Steven Orchard will be a panel judge for the 2011 USC International Real Estate Case Competition on Friday April 15th. Fight On! | | | 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 | |
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| ©2011 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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