FINFacts July 27, 2011

Volume XIX  |  No. 28  |  July 27, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.19% 5 Yr US Treasury  1.56% 5 Yr Swaps  1.83% 12-MAT  0.25% 3 Month LIBOR  0.25% 10 Yr US Treasury  2.98% 10 Yr Swaps  3.07% 11th Dist COFI  1.36% 6 Month LIBOR  0.42% 30 Yr US Treasury  4.29%

Transaction of the Week Transaction Description: $9,500,000 Acquisition/DPO for Multifamily in Northern California The Sponsor required an acquisition loan to finance the discounted pay-off (DPO) of a 96-unit apartment complex in Northern California. While the property historically operated at above 95% occupancy, cash flow suffered due to a condo conversion play that stalled in mid-2010. Challenge: The in-place NOI did not justify the required loan proceeds. Additionally, the prior operator was a condo converter and not experienced in managing rental units. Lastly, the DPO had to close by a fixed date. Solution: Based on GSP's counsel, the limited partner, an experienced multifamily owner and operator, replaced the prior operator and brought in an experienced management company to run the property. GSP then analyzed the historical operating expenses to cull-out non-recurring and capital expenditures that were attributable to the prior operator's focus on condo sales instead of traditional multi-family operations. Given the hard close date required by the lender, GSP recommended a regional bank with proven execution ability. GSP then worked with the lender to explain all the historical variances and closed the transaction on-time and as-applied for. Amount: $9,500,000 Rate: Libor + 250 bps Fixed: Yes Term: 3 Years + 1 + 1 Amort: IO for first two years, 30-year thereafter LTV: 70% DSCR: 1.20 Non-Recourse Lender Fee: 0.75% Brokers: Gary E. Mozer, Steven Orchard, Josh Roseman, Michelle Lee Hot Money National Reposition Bridge & Construction Mezz Lender Funds Below Break Even DCR Starting at 7% A national capital provider is actively funding asset reposition and value-add bridge loans for multifamily, anchored retail, office, industrial, and medical office properties to 90% LTC/80% LTV. The two year non-recourse loans are priced at 7% and sized from $10,000,000 to $50,000,000. Secondary and some tertiary markets will be considered. The capital provider will fund interest reserves and advance below a 1.0 DCR. This lender is also offering ground-up construction mezz-debt from $5,000,000 for multifamily properties up to 85% LTC priced at 10%. Hot Money National Life Insurance Company Debt Financing to $125,000,000 A national life insurance company is aggressively funding moderate leveraged Class A multifamily and commercial assets between $8,000,000 and $125,000,000 to 65% LTV. The multifamily loans are priced at T+140 fixed for 10 years. Commercial spreads are 25 bpts wider. All loans are rate locked at application, and offer 30 year amortization on a 30/360 basis. Forward commitments are available up to 12 months prior to funding. Lower leveraged transactions may qualify for 5 years of interest-only before amortizing over 30 years for the balance of the term. 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. Steve Bram Speaks at Real Estate Panel Last Thursday, founding partner Steve Bram spoke at the Southern California Real Estate Appraisers panel at the Ronald Reagan Library in Simi Valley.  Fellow speakers Greg Harris, Kevin Shannon, and Richard Pink made various commercial real estate market evaluations and projections.   Greg Harris of Marcus and Millichap highlighted vacancy caps across southern California; 3% vacancy in Ventura County, 4% in Los Angeles County, and 5% in Orange County.  Institutional investors currently underwrite Class A properties at a 4% initial cap, 5% exit cap, and leveraged and unleveraged IRRs at 9-10% and 8%, respectively.  Current underwriting consensus calls for a 7% annual rent growth.  Private investors are debt dependent, buying at 4.75-5% for class A, 5-6% for Class B, and 6%+ for Class C.   Kevin Shannon of CBRE classified office buyers as 70-80% foreign investors.  A shortage of core product has led buyers to more value-add properties.  He said that CBRE recently sold spec office land for small buildings at $115 psf in Playa Vista.  A major Glendale based Pension Fund Advisor bought Class A office product in Denver at a 5.5% cap rate. Kevin sold a large office property in Seattle, with 12 months rent support for rolling leases, at a 5.0% cap.  Investors are flipping Orange County assets purchased last year at deep discounts.  Entitled office land is selling for $23 psf and un-entitled office land is trading once again.   Richard Pink of ING Clarion referred to real estate as "the new gold".  Core is being built/bought to a 5% ROC, and apartment rents have increased from $2.25 to $2.90 in some areas.  Pension funds have $30 billion to invest, and are actively seeking deals armed with total investment capital of $100B. Capital is now advancing to second tier locations (Las Vegas, Phoenix, Boise) due to the lack of transactions in primary markets. Most advisors will now do Joint Ventures, building to core ROC's.  Industrial and apartments are very strong in the Inland Empire, with 5.5-6.0% ROC today on untrended rents.  Investors will buy core at 6.5% assuming a 10 year hold, and will live with an 8% IRR.  German, British, and Asian investors want long term assets and are not concerned with rollover in 10 years.  Pension funds do not want to sell because they cannot find places to reinvest.   The lack of core product in the market is leading investors to new pastures. Pascale's Perspective Debt Ceiling….What's the score?  It looks like there are dueling plans that may be reconciled into a grand compromise.  The main concern among investors is not default, but downgrade.  Therefore, it's the credit agencies that may decide the health of our economy and credit markets.  The Congressional Budget Office (CBO) score is key as that is a non-partisan "grade" as to the effect of the spending cuts being proposed.  Worldwide investors (China, Japan, Saudi Arabia) are concerned about the USA's growing deficit and what's being done to control borrowing.  Therefore, the amount of deficit reduction must be substantial for the rating agencies to preserve the United States' AAA credit rating.  The Market showed concern today as the Dow dropped 200 points…stay tuned  David R. Pascale, Jr.

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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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FINFacts July 20, 2011

Volume XIX  |  No. 27  |  July 20, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.19% 5 Yr US Treasury  1.47% 5 Yr Swaps  1.80% 12-MAT  0.25% 3 Month LIBOR  0.25% 10 Yr US Treasury  2.93% 10 Yr Swaps  3.11% 11th Dist COFI  1.36% 6 Month LIBOR  0.41% 30 Yr US Treasury  4.25%

Transactions of the Week Transaction Description: $13,695,000 Acquisition / Permanent Financing for Multi-Family Complex in Moreno Valley, CA GSP successfully arranged a $13,695,000 seven year, fixed rate loan to acquire a distressed multi-family asset in the Inland Empire. The property was lender-owned at acquisition and had three different property managers in 2010. As a result, the property suffered from a high tenant delinquency and economic vacancy rate. Based on the buyer's experience owning and operating multi-family assets, George Smith Partners identified a lender that recognized the property would rebound under new, hands-on ownership and management. Despite the lack of reliable historical operating history, GSP was able to secure maximum leveraged proceeds that offered three years of interest only debt service before rolling into a 30 year amortized schedule. Rate: 5.01% Term: 7 Years Amort: 3 Years Interest Only Then 30 Years LTV: 75% Prepayment: Yield Maintenance Lender Fee: Par Brokers: Steve Bram, Allison Higgins Transaction Description: $2,300,000 Cash-Out Loan Shahin Yazdi arranged the 100% cash-out refinance of a 40 Unit Multi-Family Property in Southern California. The high quality of the asset and borrower strength allowed GSP to streamline the loan process and arrange the loan in less than 45 days from application to close. The borrower required a self-liquidating loan that precluded all balloon risk. The loan is fixed for 5 years at 4.25% before converting to an adjustable rate for the remainder of the term. Amount: $2,300,000 Rate: 4.25% Fixed: Yes Term: 30 Years Amort: 30 Years Recourse Lender Fee: Par Broker: Shahin Yazdi Hot Money HIGHLIGHTS National Life Insurance Company Debt Financing to $125,000,000 A national life insurance company is aggressively funding moderate leveraged Class A multifamily and commercial assets between $8,000,000 and $125,000,000 to 65% LTV. The multifamily loans are priced at T+140 fixed for 10 years. Commercial spreads are 25 bpts wider. All loans are rate locked at application, and offer 30 year amortization on a 30/360 basis. Forward commitments are available up to 12 months prior to funding. Lower leveraged transactions may qualify for 5 years of interest-only before amortizing over 30 years for the balance of the term. Transaction Size: $8,000,000-$125,000,000 Rate: T+140 Fixed (+25 bpts Commercial) Loan Term: 10 Year Amort: 30 Years Max LTV: 65% Property Types: Multifamily, Retail, Industrial, Office Hot Money 2.59% Floating Rate to 1.05 Debt Coverage for Multifamily A national capital provider is funding multifamily floating rate loans as low as 2.59% and 1.05 DCR for transactions as small as $3,000,000. There is no maximum loan amount and smaller assets will be considered on a case-by-case basis. This non-recourse loan floats over one-month LIBOR and carries a lifetime cap fixed at closing. The loan is locked for one year then requires a 1.0% prepayment penalty. The seven year term is amortized over 30 years with lower leveraged loans qualifying for interest only. The loan may be converted to a fixed rate in years 2 through 5 with no prepayment costs and minimal re-underwriting. 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. 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. Pascale's Perspective Debt Ceiling..... Even as glimmers of hope emerge today regarding the debt ceiling drama, the "unthinkable" is beginning to be considered.  Consequences of a default and/or downgrade in the US credit rating could include: (1) Interest rate hikes across the entire credit spectrum; (2) Downgrades and increased spreads for Fannie Mae/Freddie Mac residential and commercial mortgages; (3) Automatic downgrades and increased spreads for hundreds of billions of dollars of municipal and state government debt.  The rating agencies are signaling that a debt ceiling increase must be paired with some kind of meaningful deficit reduction.  A CMBS pool went to market today with wider than expected spreads; is this a trend or a case of "investor paralysis" until the debt ceiling is resolved?  Treasuries are still holding value for now, with the 10 year yield remaining below 3.00%...This is threatening to overshadow this week's European summit on Greece that could have major implications for the future of the Euro and bank stability across the pond....Stay tuned...David R. Pascale, Jr.

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FINFacts July 13, 2011

Volume XIX  |  No. 26  |  July 13, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.19% 5 Yr US Treasury  1.44% 5 Yr Swaps  1.81% 12-MAT  0.25% 3 Month LIBOR  0.25% 10 Yr US Treasury  2.88% 10 Yr Swaps  3.05% 11th Dist COFI  1.36% 6 Month LIBOR  0.40% 30 Yr US Treasury  4.17%

Transactions of the Week Transaction Description: $5,355,000 Cash Out Perm Loan for a Troubled Asset GSP arranged the 10 year permanent loan for a newly constructed, mixed-use apartment & retail property in Los Angeles. The troubled asset was originally constructed as "For-Sale" condos in 2008, then converted to rental units upon certificate of occupancy. At construction completion, the FDIC seized the construction lender and transferred the note to a new bank. Challenge: The new lender extended the balloon date with a short-term mini-perm, but placed the loan in Special Services adding pressure on the Sponsor to be paid off. The rentals, built to condo specs, commanded higher rents, above the baseline for residential units in the area. Over 20% of the property's income is derived from retail space; spurring lenders to underwrite the leases at below contracted rates. The Sponsorship endured multiple liquidity hits and no longer met lender's baseline underwriting. Solution: GSP was able to use its market knowledge to increase the underwriter's range for multifamily comps to confirm collections. GSP demonstrated the retail tenants' dedication to this location and support their occupancy at better-than-market terms. As the subject was expertly constructed, fully occupied and managed with the utmost in "pride of ownership", GSP was able to attract a lender who understood all of these challenges. The building appraised as underwritten and the former lender was paid in full. Amount: $5,355,000 Rate: 5.37% Fixed: Yes Term: 10 Years Amort: 30 Years LTV: 75% DSCR: 1.25 Non-Recourse Lender Fee: Par Brokers: Steve Bram, Jonathan Lee Hot Money 2.59% Floating Rate to Break-Even Debt Coverage for Multifamily A national capital provider is funding multifamily floating rate loans as low as 2.59% to 80% of value and 1.0 DCR for transactions as small as $3,000,000. There is no maximum loan amount and smaller assets will be considered on a case-by-case basis. This non-recourse loan floats over one-month LIBOR and carries a lifetime cap fixed at closing – currently 6.0%. The loan is locked for one year then requires a 1.0% prepayment penalty. The seven year term is amortized over 30 years with lower leveraged loans qualifying for interest only. The loan may be converted to a fixed rate in years 2 through 5 with no prepayment costs and minimal re-underwriting. Hot Money Fund Manager $3,000,000 to $35,000,000 A national fund manager is actively originating bridge financing up to 85% of total cost. This capital provider will consider all asset types, including broken condos, and is funding both cash flowing and non-cash flowing assets. The lender will also fund assets that may require significant rehabilitation or reposition construction, renovation, and/or lease-up. No ground-up construction will be considered at this time. The senior secured, non-recourse loans are offered on 1 to 3 year terms, and generally close in 30 days. 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. GSP is Hiring! George Smith Partners is seeking motivated individuals to fill several analytical support positions. Qualified candidates may submit their cover letter and resume to Careers@GSPartners.com. The ideal candidate will possess: 2 or more years experience analyzing, packaging and placing commercial real estate loans, current knowledge of lender and investor underwriting criteria, significant experience in creating debt/equity offering packages, strong writing skills, proficiency with EXCEL and a working knowledge of ARGUS. The applicant must carry an extremely positive attitude and ability to work as part of a high quality, service-obsessed team. An MBA or advanced degree is a plus. Candidates will be offered the opportunity to join a highly experienced and renowned production team, working in a fast paced and diverse CRE financing environment helping to analyze, market and close a wide variety of commercial real estate deals on a national level. The successful candidate will interact with our clients and the highest levels of the lending and investment community as part of Team GSP – one of the most dynamic and stories real estate investment banking firms in the US. Pascale's Perspective Debt Ceiling Drama…..Italy Contagion……China and ECB Raise Rates while Bernanke Talks Stimulus……CMBS Market "Settles" for Now……..All eyes on the negotiations in Washington to avoid a US debt default. McConnell's "backup plan" is thought to be a signal to markets that "something will get done, don't worry." Nevertheless, Moody's warned of a downgrade today. Any incremental downgrade will raise rates across the board (CRE, home loans, credit cards, small business, etc). Fear factor is back as Italy, one of Europe's larger economies and therefore thought to be too big to bail out, is on the watch list with rising borrowing costs. It seems that Greece may need to strategically default in order to "save" Italy. Meanwhile, major central banks pushing and pulling in different directions. China and European Central Bank both raised rates in the last week to ward off inflation and overheating. Meanwhile, Bernanke floated "QE3" to congress today and markets rallied. Rates: The 10 year T yield has dropped 20 bps in the last two weeks on flight to quality and implied faith in a debt ceiling deal. CMBS volatility has abated (after some widening) with the average spread over Swap about 2.50% on a 10 year loan. All in rate approximately 5.60%......stay tuned…. David R. Pascale, Jr. Share Your Opinion on LinkedIn What will be the U.S. debt ceiling resolution?  Vote in our poll, and voice your reasoning at:  http://linkd.in/pC1aey

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DTE MP PET 2011 Counselling Procedure

Directorate of Technical Education M.P. Pre Engineering Test Online Counseling

DTE MP PET 2011 Counseling Process

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MP PET 2011 Counselling Schedule

MP PET 2011 Counseling Schedule

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