| Transaction of the Week |  | |  | | Transaction Description: | | $25,000,000 Non-Recourse Renovation of a 170-Unit Multifamily Property George Smith Partners successfully placed the refinance and renovation loan on a vacant 170-unit Los Angeles high-rise apartment building. The renovation cost budget allows for $94,000 per unit in capital upgrades. The three year term is priced at LIBOR+275 without an interest rate floor. |
Challenge: The Sponsor, a highly liquid developer with a strong schedule of real estate, required competitive non-recourse debt. The extensive level of renovation and zero occupancy at funding classified this request as a construction loan by many capital providers. The Borrower would not accept the higher yields required by typical non-recourse opportunity funds and effectively sought money center bank rates - without a repayment guarantee. |
Solution: GSP identified a regional bank familiar with the in-fill location and strong Sponsor attributes. The bank ultimately agreed to waive the standard recourse requirement in exchange for a low loan to cost. The capital provider underwrote a sub-50% LTV upon asset stabilization. | | | | |  | | | | National Portfolio Provider Funding Skilled Nursing and Assisted Living Facilities up to 70% LTV. George Smith Partners identified a national capital provider financing mini-perm and permanent debt for stabilized health care properties. This portfolio lender is funding skilled nursing, assisted living, and dialysis centers nationwide. Operating entities for owner/user as well as leased assets to investors will be underwritten to a 1.35 DCR on a 25 year amortization schedule, and 70% LTV. A three year operating history and a personal repayment guarantee are required for funding. Pricing starts at 5.50% for a five year fixed rate loan with flexible prepayments. Structures include three, five and seven year terms. | | | | Hot Money | Short Term Joint Venture & Preferred Equity from $3,000,000 GSP identified an equity provider that is targeting middle-market transactions. This capital source is seeking to advance up to 90% of the equity co-invest on value-add projects. Joint Ventures or Pref Equity can be structured for an experienced and local operating partner. Performing and non-performing discounted note purchases will also be considered. Two to five year hold periods will be underwritten for equity requirements from $3,000,000 to $10,000,000 with as little as a 10% capital contribution from the operator. | | | 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. | | | 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. | | | Pascale's Perspective | Spotlight on CMBS: CMBS spreads have tightened slightly in the last month as several pools have gone to market. Demand for bonds varies between tranches from very strong to lack-luster. There is strong demand for the AAAs with a suitable number of active B piece buyers. The weak demand is in the middle of the stack: A, BBB, BB, etc. In CMBS 1.0 (until 2006), Life Companies were the typical buyers of these bonds and they were comfortable with the yields they offered. The new buyers of this segment are hedge funds that are demanding higher yields. The overall execution is inefficient, making new loan pricing more difficult. Another issue is the "lopsided" relationship between the treasury and credit risk portions of the overall loan coupon. In CMBS 1.0, treasuries were at approximately 5% or 6%, with credit spreads of 1% to 2%. Today, the treasury is at 2% and credit spreads are 4%. Lenders can hedge treasury risk fairly well, but not spread risk. Today's headline driven spread volatility is another impediment to efficient pricing. The key for originators is to securitize as soon as possible after loan closing. We are finding that a lender will be at their most aggressive on pricing and proceeds shortly before a pool is scheduled to price. The best 10 year pricing we are seeing today is in the low 6% range for full leverage. Stay tuned...... David R. Pascale, Jr. | |
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