FINFacts September 28, 2011

Volume XIX  |  No. 37  |  September 28, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.24% 5 Yr US Treasury  0.96% 5 Yr Swaps  1.28% 12-MAT  0.23% 3 Month LIBOR  0.37% 10 Yr US Treasury  1.98% 10 Yr Swaps  2.17% 11th Dist COFI  1.35% 6 Month LIBOR  0.55% 30 Yr US Treasury  3.07%

Transaction of the Week Transaction Description: $4,200,000 Refinance and Reposition Loan of a 196 Unit SRO Apartment w/Ground Floor Retail Bryan Shaffer successfully placed the $4,200,000 refinance of a 196 Unit Single Resident Occupant (SRO) apartment in the CBD of Los Angeles. The subject property offers ground floor street-front retail as part of the collateral. Built in 1900, the former hotel was acquired in late 2010 with institutional and private debt. The new owner is completely rehabilitating the project, initiating the redevelopment with investor cash equity. The project was vacant and undergoing major construction at close of escrow, requiring additional capital to complete the renovation of the living units. The 10-year year term loan was priced at 6.25% fixed with 30 year amortization and a step-down pre-payment penalty. Challenge: Most SROs are essentially studio apartments with a sink and kitchenette, providing residents with shared bath and kitchen privileges. Lenders are not comfortable financing SROs due to their lack of bathrooms in each unit. The 100% vacancy and major construction program added to the challenges. This high-profile property carried a troubled past. Title was impaired by the Rent Escrow Account Program (REAP) due to the prior owners' neglect in providing for safe living conditions. It was critical to the sponsor that rehab construction was not delayed by the financing process. Solution: GSP used its extensive market expertise and lender relationships to identify a Southern California based lender with an affordable multi-family housing mission and unique loan programs that would allow the un-stabilized project to receive long term market rate financing. The borrowers' business plan and capital contribution to date made the lender comfortable to fund through the REAP encumbrance. GSP closely managed the application, due diligence, and closing process to ensure the loan closed on time. This constant attention contributed to the borrower receiving an additional 10% in loan proceeds at closing. Rate: 6.25% Term: 10 Years Amort: 30 Years Prepayment: 3%, 2%, 1% open Recourse Lender Fee: 1.5% Broker: Bryan Shaffer Hot Money HIGHLIGHTS Ten Year Mezzanine Debt from $2,000,000 for Stabilized Assets A national capital provider of Mezzanine Debt is seeking to bridge the refinance gap of overleveraged maturing CMBS loans. This fund will advance to 80% of value for five to ten year terms at rates ranging from 12% to 14%. Larger transactions will garner a lower interest rate, fixed as low as 10% for the entire loan term. Transaction Size: $2,000,000 to $10,000,000 Rate: 12% to 14% Loan Term: 5 to 10 Years Non-recourse Hot Money National Portfolio Lender Allocated $500,000,000 to Disperse Before Year-End, Pricing From 3.87% for 10 Year Term A major Life Insurance Company recently received a $500,000,000 allocation to be distributed by year-end. This portfolio lender is currently offering multifamily, industrial, retail, and office financing in the top 50 major metropolitan markets. Loans range from $10,000,000 to $50,000,000, with larger amounts considered on a selective basis. Loan terms of 5 to 10 years are available, along with 15, 20, and 25-year fully amortizing options. Interest Only payment structures can be obtained for sub-60% LTV requests. Pricing for 55% LTV loans starts at 3.11% and 3.87% for 5 and 10-year terms respectively. A maximum of 75% leverage is available at higher but equally competitive rates. 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. Speakers Corner Founding Partner, Gary M. Tenzer is Co-Chairman of the 40th Annual Crocker Symposium to be held on Tuesday October 4th at the JW Marriott Hotel/LA LIVE Los Angeles. Mr. Tenzer will also participate on the finance panel for this event. Registration and additional information on the Symposium may be found here. The Crocker Symposium is an annual conference on Real Estate and the Law, jointly sponsored by the UCLA Ziman Center and the Los Angeles County Bar Association. Pascale's Perspective Europe... The "fix" is not in yet...  Last week's market volatility and subsequent G20 meeting got the attention of the European policymakers.  They are shoring up the European Financial Stability Facility (aka "Euro Tarp") to $600 billion.  The problem: once again, it is too little, too late as this is enough for Greece only, but the contagion now means the facility needs to be about $1.5 trillion to accomplish its goals.  It seems there isn't enough political will to either: (1) fully fund the facility or (2) start a "controlled default" of Greece and hope the consequences are "containable".  The Fed" QE3 aka "The Twist" is underway.  A little discussed feature of QE3:  In addition to selling short term treasuries and buying long term, the Fed is taking mature Fannie, Freddie and MBS bonds and reinvesting the proceeds back in to MBS.  This should narrow spreads between MBS and Treasuries in an attempt to aid the housing market.  All this is being done without expanding the Fed balance sheet which has been a political hot button  ...Stay Tuned... David R. Pascale, Jr.

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FINFacts September 21, 2011

Volume XIX  |  No. 36  |  September 21, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.23% 5 Yr US Treasury  0.84% 5 Yr Swaps  1.16% 12-MAT  0.23% 3 Month LIBOR  0.36% 10 Yr US Treasury  1.86% 10 Yr Swaps  2.16% 11th Dist COFI  1.35% 6 Month LIBOR  0.50% 30 Yr US Treasury  2.99%

Transaction of the Week Transaction Description: $1,740,000 Cash-Out Refinance for Unentitled Land GSP's Sponsor required a bridge loan for the cash-out refinance of a 12.5-acre unentitled parcel in Oceanside, California. Proceeds from the 18-month, Interest Only loan will be used for pre-development costs on a proposed 165-room Hilton flagged hotel near the Pacific Ocean. Challenge: Lenders' appetite for land financing is relatively low, and pinpointing a reliable Hard Money lender is difficult in today's market. The property was free & clear at funding and despite significant cash invested, is still considered a cash-out scenario by capital providers. The appraised valuation of the land was lower than expected. Solution: GSP identified a reliable private equity capital provider who is comfortable with the borrowers' business plan and exit strategy. The lender ultimately funded a greater loan-to-value ratio than originally forecasted, and was able to close in a timely manner. Rate: 13.5% Term: 18 Months LTV: 45% Recourse Broker: Gilda Rivera Hot Money National Portfolio Lender Allocated $500,000,000 to Disperse Before Year-End, Pricing From 3.87% for 10 Year Term A major Life Insurance Company recently received a $500,000,000 allocation to be distributed by year-end. This portfolio lender is currently offering multifamily, industrial, retail, and office financing in the top 50 major metropolitan markets. Loans range from $10,000,000 to $50,000,000, with larger amounts considered on a selective basis. Loan terms of 5 to 10 years are available, along with 15, 20, and 25-year fully amortizing options. Interest Only payment structures can be obtained for sub-60% LTV requests. Pricing for 55% LTV loans starts at 3.11% and 3.87% for 5 and 10-year terms respectively. A maximum of 75% leverage is available at higher but equally competitive rates. Hot Money Non-Recourse Land Loans are Back! An institutional capital provider is currently funding land acquisitions and refinances from $3,000,000 to $20,000,000 in "high growth corridors". Markets include Southern California, Arizona, Colorado, Texas and the eastern seaboard from Virginia to Florida. Interest Only payments are made on a quarterly basis with fixed rates varying from 13% to 15% based on risk and term. LTV from 50% to 70% of the current market value for up to 36 months with recourse limited to standard carve-outs. Use of proceeds may include horizontal construction (off-sites, utilities, grading, etc.) Land note purchases will also be considered. 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. Speakers Corner Founding Partner, Gary M. Tenzer is Co-Chairman of the 40th Annual Crocker Symposium to be held on Tuesday October 4th at the JW Marriott Hotel/LA LIVE Los Angeles.  Mr. Tenzer will also participate on the finance panel for this event.  Registration and additional information on the Symposium may be found here.  The Crocker Symposium is an annual conference on Real Estate and the Law, jointly sponsored by the UCLA Ziman Center and the Los Angeles County Bar Association. Pascale's Perspective Fed Announces "Twist" Program  Today's 2-day Fed meeting closed with the expected "sell short, buy long" bond strategy.  The Fed will sell $400 billion of maturing short term (6 month to 2 year maturities) bonds and use the proceeds to buy long term bonds (5, 10, 30 year maturities).  JFK tried this in 1961, partly to discourage investors from selling dollars for gold and then selling the gold in Europe for a profit.  Another reason was to provide stimulus by keeping long term rates lower.  There is no clear consensus on the effectiveness.  The program was originally thought to be a failure but some economists think that it was effective after isolating certain statistics.  Today's announcement caused a massive sell-off in stocks and continued an unprecedented bond market rally, driving the 10 year Treasury yield down to 1.86%!  How much real stimulus will occur?  Rates have been at generational lows for an extended period and the economy has been slow or stagnant.  Are consumers and businesses reluctant to spend on houses, cars, hiring, etc. because rates have been too high? Or is it fear of an uncertain future?  ...stay tuned...  David R. Pascale, Jr

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FINFacts September 14, 2011

Volume XIX  |  No. 35  |  September 14, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.23% 5 Yr US Treasury  0.88% 5 Yr Swaps  1.18% 12-MAT  0.23% 3 Month LIBOR  0.35% 10 Yr US Treasury  1.98% 10 Yr Swaps  2.18% 11th Dist COFI  1.35% 6 Month LIBOR  0.50% 30 Yr US Treasury  3.27%

Transaction of the Week Transaction Description: $8,250,000 Non-Recourse Multifamily Acquisition Loan GSP's Sponsor required a senior loan for the purchase of a stabilized, 96% occupied, 120-unit apartment complex outside Sacramento, California. The 7 year loan provides 18 months of Interest Only at LIBOR + 250 with no floor before amortizing over 30 years. Challenge: The Borrower, a fund, required a low interest rate, non-recourse debt and prepayment flexibility. Though the asset is performing well, it's tertiary location constrained appetite from potential lenders. Solution: GSP drew on its' extensive market relationships to identify a Sacramento-based lender with local knowledge of the submarket. GSP demonstrated the institutional buyer's depth of experience to attain pricing and terms that are typically available only for assets in core market locations. Rate: LIBOR + 250 Term: 7 years Amort: 18 months IO then 30 years LTV: 55% DCR: 1.70 on actual IO rate Prepayment: 2%/1%/open Non-recourse Lender Fee: 0.50% Brokers: Gary E. Mozer, Steven Orchard, Josh Roseman, Michelle Lee Hot Money Non-Recourse Land Loans are Back! An institutional capital provider is currently funding land acquisitions and refinances from $3,000,000 to $20,000,000 in "high growth corridors". Markets include Southern California, Arizona, Colorado, Texas and the eastern seaboard from Virginia to Florida. Interest Only payments are made on a quarterly basis with fixed rates varying from 13% to 15% based on risk and term. LTV from 50% to 70% of the current market value for up to 36 months with recourse limited to standard carve-outs. Use of proceeds may include horizontal construction (off-sites, utilities, grading, etc.) Land note purchases will also be considered. Hot Money Mini-Perm/Long-Term Mezz Debt & Pref Equity to $50,000,000 A national capital provider with $1 Billion of capital and cash on hand is extending mezzanine-debt & preferred equity behind banks, Wall Street, insurance companies, and is pre-approved with Freddie Mac to 85% LTV. An inter-creditor agreement is not required. Terms must be co-terminus with the senior debt, and range from four years to ten years with pricing from 9% to 11%. All major asset classes are considered. Some pay/accrue structure is possible although existing cash flow must be in place at close. 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.

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FINFacts September 7, 2011

Volume XIX  |  No. 34  |  September 7, 2011

Letter to the Editor

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KEY RATE INDICES Prime Rate  3.25% 1 Month LIBOR  0.23% 5 Yr US Treasury  0.91% 5 Yr Swaps  1.17% 12-MAT  0.23% 3 Month LIBOR  0.34% 10 Yr US Treasury  2.04% 10 Yr Swaps  2.21% 11th Dist COFI  1.35% 6 Month LIBOR  0.50% 30 Yr US Treasury  3.37%

Transactions of the Week Transaction Description: $18,500,000 Refinance of a Grocery-Anchored Nevada Retail Center GSP successfully placed the no-cash-out refinance of a 98% occupied grocery-anchored retail center in Henderson, Nevada. The seven year term loan is priced at 4.75% fixed, and underwritten to a 12% debt yield. Challenge: The Sponsor required a non-recourse loan in a market that many lenders still perceive to be vulnerable to further decline. The grocery anchor is not credit-rated or obligated by the lease to provide sales information. The Sponsor required certainty of execution as the existing loan was maturing in less than thirty days. Solution: GSP completed a significant amount of upfront due diligence and presented a thorough package to lenders, permitting them to fully vet the perceived transaction risks. GSP identified key lenders who are familiar with and are actively lending in the Las Vegas retail market and subsequently qualified all deal terms prior to execution of the term sheet. Once signed, GSP closely managed every step of the due diligence and closing process to ensure the loan closed on time and as applied for, allowing for a substantial reduction in monthly debt service. Rate: 4.75% Fixed Term: 7 Years Amort: 25 Years LTV: 70% Prepayment: 3%-2%-1%-par Non-recourse Lender Fee: 0.25% Brokers: Gary E. Mozer, Steven Orchard, Josh Roseman, Michelle Lee Transaction Description: $2,400,000 Ground-Up Construction Loan in La Jolla, California GSP successfully placed the $2,400,000 construction loan on a vacant parcel for the development of a luxury second home. The 30 year term loan is priced at 4.375% to 75% LTC. The loan allows for interest only payments for the first 10 years including the construction term, then amortizes over a 20 year period. Challenge: The Borrower was very rate sensitive and needed to maximize loan proceeds, requiring quick-close financing with favorable prepayment terms. To accommodate their escrow commitment and close the land on time, the Sponsor necessitated a pledge to fund prior to obtaining the final building permits. Solution: GSP drew on their extensive capital relationships to identify a reliable ground-up construction loan provider willing to offer an aggressive loan structure at favorable pricing. Funding occurred within 30 days of loan application. Rate: 4.375% Term: 30 Years Amort: 10 Years IO, then amortizing over 20 Years LTC: 75% Prepayment: 1/2% Years 1-4; par thereafter Broker: Malcolm Davies Hot Money Mini-Perm/Long-Term Mezz Debt & Pref Equity to $50,000,000 A national capital provider with $1 Billion of capital and cash on hand is extending mezzanine-debt & preferred equity behind banks, Wall Street, insurance companies, and is pre-approved with Freddie Mac to 85% LTV. An inter-creditor agreement is not required. Terms must be co-terminus with the senior debt, and range from four years to ten years with pricing from 9% to 11%. All major asset classes are considered. Some pay/accrue structure is possible although existing cash flow must be in place at close. Hot Money No Floor Money Center Bank at LIBOR + 250 A national Money Center Bank is looking to expand their on-book commercial real estate holdings by $500,000,000 and will price down to LIBOR + 250 without a floor on multifamily, office, retail and industrial properties. Initial transactions of $10,000,000 or more will be required for smaller transactions to be considered on a go-forward basis. The floating rate loan does not carry a pre-payment penalty and can be swapped for a fixed coupon. Ground-up construction will be considered with a repayment guarantee. Non-recourse debt is available for cash flowing assets below 65% LTV. Mezzanine debt to 85% of value is permitted from an approved partner. 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. Speakers Corner Managing Director David Rifkind will moderate a financing panel on The Analysis and Trends in the New Cycle at the Crittenden Real Estate Conference September 18th through the 20th.  The conference will be hosted at The Ritz Carlton South Beach.  Registration and more program information may be found here. In The Press Managing Director David Rifkind was featured in the August 29th edition of the Los Angeles Business Journal as one of Los Angeles' Retail Groundbreakers. Pascale's Perspective German Court Decision Provides Some Relief...  Europe worries are again front and center...  Credit Markets "Fear Factor" has been raised over the past week.  Why?  (1) German court case could have resulted in an invalidation of the Greek rescue plan from Europe's healthiest economy; (2) Disarray among the Euro countries over the public/private risk sharing arrangements within the bailout structure; (3) Greece lowering future growth forecasts; (4) Unrest in Italy at the mere mention of austerity.  As the G7 is set to meet in France next week, two scenarios are being discussed: "All-In" or "breakup".  The markets prefer the "All-In" scenario, which may include: a) "Euro-bonds": A diversified risk instrument issued by the Euro members jointly and severally; b) "United States of Europe"; A powerful ECB much like the US Federal Reserve and a streamlined decision making system among the nations.  This will avoid a repeat of Finland attempting to negotiate better collateral terms on the eve of the implementation of the Greek rescue plan.  Obviously there are major political roadblocks to such a structure, but it may be the only way to avoid disarray and a credit crash.  The "breakup" scenarios involve weak countries (Greece, etc.) or strong countries (Germany) exiting the Euro and/or controlled defaults/restructuring by weaker countries.  Fed Chairman Bernanke indicated that US exposure to Europe was "manageable". Stay Tuned.....  David R. Pascale, Jr. Post Script:  Pascale's Perspective did not appear last week as I suffered a personal loss when my long-time friend Christian Weinman passed away.  I dedicate this weeks' column to his memory.  I would like to take this opportunity to ask each and every reader to reach out to those close to you, and more importantly those not as close to you to let them all know what you mean to them and how important their lives are to you.

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