| Transactions of the Week |  | |  | | Transaction Description: | | $4,500,000 Perm Loan for a Troubled Asset GSP negotiated a 5 year permanent loan for a newly constructed, 32-unit apartment project in Downtown Los Angeles. Constructed in 2008, the FDIC seized the construction lender at project completion 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 Serving at an 8.0% default rate, pressuring the Sponsor's liquidity and ability to pay-off. The project is the only sub-50 unit apartment project constructed downtown in the last three years - all other projects are 100+ units. Larger projects appraised at 5.00% CAP rates although no apartment buildings in the 25-50 unit range traded for less than a 6.75% CAP rate due to their age. The Sponsorship endured multiple liquidity hits and credit issues, no longer meeting lender's baseline underwriting. |
Solution: GSP was able to use its market expertise to increase the underwriter's range for multifamily comps and support CAP rates closer to 6.00%. GSP assisted the Sponsorship reorganization to remove one of the owners from the LLC, mitigating the negative credit. Finally, GSP was able to demonstrate that liquidity would build up from operating cash flows and a greatly reduced rate. The building appraised and the former lender was paid in full. | | | Rate: 4.66% | | Term: 5 Years Fixed | | Amort: 30 Years | | LTV: 75% | | DCR: 1.15 | | Recourse | | Lender Fee: Par | | Brokers: Steve Bram, Jonathan Lee | | | |  | | | | Regional Bank Funding Bridge & Construction $5,000,000 to $100,000,000 A western regional bank is funding construction and bridge projects up to 85% of cost in 19 Western states including Missouri, Wisconsin, and Hawaii. The LIBOR based financings carry a minimum 50% recourse, no floor, and are available to professional real estate borrowers. This capital provider will consider most property types with at least 10% cash-in on a spec basis with no preleasing required. Fixed coupons may be provided with a SWAP or cap/collar at L+250-300. | | Transaction Size: $5,000,000-$100,000,000 | | Max LTC: 85% | | Recourse | | Property Types: Multifamily, Industrial, Office, Retail, Tract Housing | | Fees: 0.5-1% | | Geography: Western U.S. | | | | | 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%. | | | 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. | | | Public-Private Partnerships: A ULI Recap | George Smith Partners co-sponsored last weeks' Urban Land Institute (ULI) forum on public-private partnerships and redevelopment. The event was well attended with over 70 present for the engaging discussion and post-panel networking. For those who missed it, here is a brief recap: As most states search for ways to slash budgets, redevelopment agencies have become a primary source for roll-backs. Community supporters have stepped up, and several bills exist at the senate level with proposed back-up arrangements that mimic tax increment initiatives. Panelists agreed that state legislatures would be challenged to eliminate such a vital tool, thereby handicapping the creation of jobs and future economic activity stemming from redevelopment efforts, particularly in blighted areas that few developers venture into otherwise. With significant headwinds for developers, it is crucial to plan far in advance, allowing for project financing alternatives regardless of political and community approvals, executed leases and sales escrows. Although rebounding, the capital market volatility requires constant monitoring in lining up institutional debt and equity. | | | GSP is Hiring! | George Smith Partners is seeking motivated individuals to fill several analytical support positions at our Los Angeles headquarters. 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. Noteworthy 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 storied real estate investment banking firms in the US. | | | Pascale's Perspective | The Deal is Done, Now What? QE3?...... The last-minute drama on the debt ceiling resolution held the attention of the world markets. The deal itself is a rebuke of Keynesian economics and an all-in bet on Milton Friedman influenced monetarism (more on that in a future column). Was it enough to stave off a downgrade? Moody's issued a statement reaffirming the AAA, but S&P is still "on the fence". This week, investor attention went to the actual US economic outlook. Based on recent reports (manufacturing, personal spending, employment), that outlook is bleak, indicating the possibility of the dreaded "double dip" recession. Massive amounts of capital went into US Treasuries, bringing the 10 year yield down to 2.60%. With Congress firmly in a "no stimulus" mode, the Fed is left to act alone. Three Fed governors have suggested that another round of bond buying may be in order, providing that inflation is not a risk. Bernanke himself is still concerned about deflation and may push for bond buying. Will that really help the fundamental issue, which is new hiring by corporations (sitting on trillions in cash) and small business (many of whom are still unable to borrow)?….stay tuned…David R. Pascale, Jr. | |
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