| Transactions of the Week |  | |  | | Transaction Description: | | $19,250,000 Cash-Out Refinance of a 150,000 sf Anchored Retail Center. GSP successfully arranged the $19,250,000 cash-out refinance of an existing bridge loan, secured by a stabilized 150,000 sf market/drug center in North Los Angeles County. The borrower required a non-recourse financing structure that provided a return of equity while releasing an adjacent parcel Free & Clear from the current lender. |
Challenge: Despite the return of the Capital Markets, non-recourse cash-out retail financing is still not widely embraced. A number of leases are month-to-month that further complicated the underwriting. Multiple issues also arose during the due diligence period that included tenants in transition, legacy environmental issues (several), and parking & zoning ambiguities with the City. |
Solution: GSP surveyed the permanent debt market including Life Insurance Companies, Banks and Wall Street Conduits to identify a lender willing to understand the unique characteristics of this asset. GSP worked with all parties to support the investment thesis: Fortress neighborhood retail with barriers to entry and significantly under-market rents. This loan offers a fully funded lease up and rehab reserve, which supports the borrowers' investment objective. As the adjoining parcel does not contribute to the net cash flow, the new lender released it from their collateral. | | | | |  | | Transaction Description: | | $3,200,000 Cash-Out Refinance in 35 Days. GSP arranged the $3,200,000 non-recourse refinance of a stabilized multi-family property in just 35 days from being introduced to the transaction. The asset was previously Free & Clear so this represented a 100% return of equity on the Southern California apartment building. Timing was critical to meet the borrowers' investment objectives for an unrelated project. GSP worked with the borrower, lender and 3rd party vendors to present an expedited but fully under-writable package to loan committee. | | | Rate: 5.30% | | Term: 10 years | | Amort: 30 years | | LTV: 55% | | DCR: 1.45 | | Non-recourse | | Broker: Shahin Yazdi | | | |  | | | | Small Mezzanine and Preferred Equity to 90% of Cost Most Mezz Funds target minimum investments of $5,000,000 for assets requiring total capitalizations of $20,000,000 and more. A Southern California based Mezzanine lender is filling the need for Mezz and Pref Equity allocations from $2,000,000 to $5,000,000 for acquisitions as small as $10,000,000. This capital provider will advance to 90% of purchase price. Only stabilized assets will qualify for the three year term loan. A current pay of 8% to 10% is required for an all-in 15% to 17% yield. Secondary markets will be considered for strong borrowers. | | | | Hot Money | Southern California Portfolio Lender Funds @ sub-5% Fixed A Southern California relationship lender is seeking to expand their commercial loan portfolio to high net worth borrowers at very competitive rates. They are willing to advance to 70% of value on core assets with rates as low as 4.75% fixed for five years on transactions to $10,000,000. The shorter term fixed rates are not swapped, allowing for a declining pre-payment penalty. Assets must be stabilized and the borrower must be Southern California based. | | | 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. | | | Speakers Corner | Founding Partner Gary E. Mozer will be moderating a panel discussion on structured debt financing for middle and institutional market borrowers at the Commercial & Retail Development Council on Thursday May 18th. The Council meeting will be held at the Phoenix Convention Center May 18th and 19th. | | | Pascale's Perspective | Europe matters.... Here's why News from Europe moves the markets and sometimes raises the "fear factor". Recent events: Greece sovereign debt was downgraded again.... Finland elects leaders that ran on an "anti-bailout" platform... Portugal's new bailout is approved.... Last year saw riots in Greece and now ongoing protests in Portugal and Ireland as people in these countries feel that austerity measures are unwarranted punishments being doled out by "bond vigilantes". Markets shudder on seemingly minor news items that hit the global new cycle in an instant. Example: August 2010 a tax court in Spain ruled that certain sales tax revenues were invalid. This sent various bond yields and credit spreads up within hours as investors worried that one of Europe's largest economies was taking a hit and their sovereign debt was at risk. Markets calmed the next day when the ruling turned out only to delay certain tax collections. Is "restructure" a bad word? We may find out sooner rather than later. Many politicians, bankers, etc feel that the debt load on these countries combined with the high yields the market demands is untenable. There is not enough total output/GDP for these countries to dig out. Recent positive private equity investments in Spanish and Italian banks have given rise to the hope that those countries are in recovery and will not need bailouts. Therefore the problems may be limited to Greece, Portugal and Ireland. If those countries are allowed to restructure their debt, then they should return to normalcy. The potential problem is that "restructure" means "debt forgiveness" or "controlled default". When debt defaults occur anywhere (globally), the potential for a 2008 style panic looms as credit markets everywhere grind to a halt and investors hoard cash. A European banking crisis may occur as investors and depositors may not be able to identify what banks are holding bonds from the defaulting countries and cause a run on banks. If the current system is unsustainable, then the question is when to start the restructure? Some European leaders say that 2013 is the right time due to some rule changes, while some are pushing for this year. Advocates of restructure hope that a cooperative agreement complete with IMF participation and international consensus will not rattle markets, avoiding a 2008 Lehman style panic. Stay Tuned... David R. Pasacale, 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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