| Transactions of the Week |  | |  | | Transaction Description: | | Spec Home Construction Loan GSP successfully placed a non-recourse acquisition and construction loan for an investor to acquire a tear-down single family residence and build a new ground-up spec home to be sold upon certificate of occupancy. |
Challenge: The borrower was in escrow to purchase a small 1950's bungalow on a large lot in a desirable Los Angeles residential market. The borrower needed funds to close quickly in addition to funding construction costs going forward. |
Solution: GSP demonstrated the excellent location, construction concept, borrower's track record, and strength in the local market to a private lender who funded 100% of the purchase price and provided additional development dollars for construction. GSP established the lender's low risk position using current for-sale information and the exit sale probability of the borrowers' completed project. Because of the ample market information presented by GSP, the lender did not require an appraisal and was comfortable funding the 75% loan-to-cost transaction. | | | Rate: 13.0% | | Term: 1 year + extensions | | Amort: Interest Only | | LTC: 75% | | Prepayment: None | | Non-recourse | | Lender Fee: 2.0% | | Broker: Jonathan Lee | | | |  | | | | Turn-Around Non-Recourse Bridge Debt A national institutional capital provider has rolled out a non-recourse reposition program funding transactions below break-even coverage. Ground-up construction is excluded although acquisitions with no cash flow at close are viable. Total loan-to-cost of 70% for loans from $5,000,000 to $20,000,000 are advanced at LIBOR + 400 to 700 bpts. The lender will charge a 1 point origination fee with a 1 point exit fee. | | Transaction Size: $5,000,000 - $20,000,000 | | Rate: L + 400 to 700 | | Max LTC: 70% | | Non-recourse | | Prepayment: 1 point exit | | Fees: 1 point | | Geography: Nationwide | | | | | Hot Money | 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 up to $5,000,000. 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 starting at 6% fixed for five years. This nationwide program does not have a prepayment penalty. | | | 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. | | | Joint Venture Investor Safety Comes First | Small developers are eternally struggling to raise local equity for capital investments of untested development and reposition projects. Winning the hearts and minds of new investors is usually about safety first - protecting the investors' cash investment. A good investment prospectus shifts the discussion from trusting your instincts to accepting a sensible business plan. This is especially important when your investors are family, friends, or long time business associates. It is only after you demonstrate your duty of care to the investor, that your investment return model really lights up. The process starts with evaluating how the framework of the ownership structure is established. Who and how many loan guarantors will there be in the ownership? How will funds be escrowed and dispersed? What is the experience level of the person driving the transaction? Thankfully small balance non-recourse CMBS financing has finally returned for stabilized multifamily, office, retail, and industrial assets for loan sizes between $2,000,000 and $5,000,000. This is a welcomed relief to syndicated ownership structures where no one investor will guarantee the debt. Syndicating and managing a joint venture partnership is no simple exercise. All available resources should be leveraged in your endeavor to organize and structure your partnership and protect your investors' capital. Ameet Chagan | | | Pascale's Perspective | US Debt Downgrade?........QE2.5? Standard and Poors issuing a "negative" outlook for US debt was a warning from the agencies that a downgrade from AAA is possible. This would significantly increase borrowing costs for the government and lead to higher rates across the board. The fixed income markets, including Treasuries, did not react with selling or panic. Is it a "non-event" or a "wait and see"? Many are hoping that it will add a sense of urgency to real broad based deficit reduction. Fed Watch: Fed chairman Bernanke indicated that while the Fed may stop purchasing treasuries and MBS in June (the end of Quantitative Easing), the central bank may "rollover" maturing debt into the markets. This would allow a gradual end to the Fed involvement, hopefully avoiding a shock to the system during recovery. Stay tuned..... David R. Pascale, Jr. | | | Come Grow With Us | George Smith Partners is expanding its team of top-notch mortgage brokers/originators. We offer highly competitive compensation and an excellent environment in which to work, learn and be supported. We invite you to consider a career with George Smith Partners. Please direct confidential inquiries to Todd August, Chief Operating Officer, at (310) 897-2995 | |
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