| Transaction of the Week |  | |  | | Transaction Description: | | $5,475,000 Refinance of an 88-Key Hampton Inn Ameet Chagan placed the 10-year, $5,475,000 refinance for a limited service Hampton Inn Hotel in central California. The subject offered limited operating history having opened year-end 2008, and is located in a tertiary market. Proceeds were used to pay off the current debt; there was no return of equity to the Borrower. The 5-year fixed rate will reset to 1.75% over the bank's cost of funds years 6 through 10, and is amortized over 25 years. The Borrower will realize $375,000 in improved cash flow during the first 5 years of the term. |
Challenge: The hotel is located in a tertiary market with few comparable sales. Significant prepayment penalties pushed the loan request beyond the 70% LTV threshold, a level most institutional lenders will not exceed. The Sponsor depleted nearly all of his liquidity in the process of stabilizing the asset during the market downturn, and global borrower cash flow was less than satisfactory for many lenders. The Sponsor was in technical default on the senior loan due to unpaid supplemental property tax bills. The initial MAI appraised value was estimated $2,000,000 below anticipated levels, requiring additional cash to close. |
Solution: GSP identified a lender with an appetite for hospitality. The lender became comfortable with the property's location and strength among the competitive set. Superior reviews posted on social networking sites supported ADR and occupancy proformas. The 2.65% reduction in the interest rate improved post-closing cash flow, dramatically improving the Borrowers' global position. The bank agreed to allow the sponsor to pay supplemental taxes after close from refunded reserve proceeds held by the original lender. GSP diligently reviewed the draft appraisal and provided additional market information, supplementing the appraisers' analysis. The original value was adjusted, but still failed to cover the needed payoff. GSP worked with the bank to take advantage of a State-sponsored insurance program that allowed for a higher LTV threshold. These actions allowed the lender to fund full proceeds, including all prepayment penalties. | | | Rate: 6.0% fixed for 5 Years | | Term: 10 Years | | Amort: 25 Years | | LTV: 84% | | Prepayment: 5%, 4%, 3%, 2%, 1% | | Recourse | | Lender Fee: 0.71% | | Broker: Ameet Chagan | | | |  | | | | National Non-Recourse Bridge Loan Program to 80% LTV from $10,000,000 George Smith Partners is originating bridge acquisitions and refinances to 80% LTV with a national portfolio lender. This capital provider utilizes a "Life Company" process for their non-recourse transactions. Floating rate loan terms range from 3 to 10 years, offering a roll-over into a 30/360 amortization upon stabilization. Class A & B products financed are office, industrial, retail and housing; including student housing and condo reconversions. Broken condos will also be considered with an accrual debt service structure and 8.5% look-back return to the lender. | | | | Hot Money | 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. | | | 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 and Managing Member Steve Bram is a frequent lecturer at UCLA and USC. On Thursday October 6th, he will be a guest lecturer for the USC Master's Program in Policy Planning and Development. Mr. Bram will lecture on the financing of the development process. Also on the 6th, he will guest lecture the Advanced Real Estate Finance class at the USC Marshall School of Business. Fight On Steve! | | | In The Press | GSPs newest addition, Eli Wexler, was recently interviewed by Commercial Property Executive Magazine as a Member of the Gen Y Connection, the dynamic 20-somethings entering today's commercial real estate environment. The October 2011 interview begins on Page 27 and may be found here. | |
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