| 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 | | | |  | | | | 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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