| Transaction of the Week |  | |  | | Transaction Description: | | $6,700,000 Joint Venture Multifamily Acquisition & Reposition George Smith Partners arranged the $6,700,000 equity investment to facilitate the acquisition of a 400 unit multifamily property in Houston, Texas. The recently renovated class A asset was operated poorly due to ownership and management turmoil. The resulting discounted value promised significant yield for the new buyer, a strong regional operator with a portfolio of apartments in Texas. Existing debt was assumed as part of the acquisition at an initial purchase basis of $65,000 per unit. Minor renovations and an extensive management overhaul are expected to reposition the asset for a long term hold in the sponsor's portfolio. The institutional investor introduced by GSP anticipates multiple acquisitions with the sponsor, thereby expanding their holdings in the southeast. | | | | |  | | Multifamily Commercial Bank Rates | Commercial banks continue to tighten their multifamily loan pricing in an effort to attract strong borrowers. Three LA-based lenders reduced their 5 year fixed rates by 30 basis points this week. Owners can now justify incurring prepayment penalties to secure current fixed rates. One West Coast bank will price as low as 3.5% fixed for 5 years in exchange for a meaningful depository relationship. Several non-agency capital providers are offering full term interest-only and/or non-recourse on fully leveraged loans. Commercial banks are still winning 5 year fixed rate business from agencies due to their additional net proceeds, flexibility of prepayment, and the ability to lock rate at application. We are also seeing a surge in multifamily bridge requests. For experienced operators, the most aggressive lenders will fund as high as 75% of the stabilized value with break-even coverage on day 1. These terms are contingent upon the signing of a personal repayment guarantee. Non-recourse bridge requests need to be larger, typically over $3,000,000, and are constrained to 65-70% of cost. Pricing starts in the low 300s over Libor. Borrower qualifications have remained somewhat consistent. Lenders are looking for 5-10% of the loan amount in liquidity and a net worth equal to 1.5-2.0 times the loan amount. This is definitely a "Borrower's Market". The intensity of competition between commercial banks makes this an exciting time for apartment owners and intermediaries to these capital sources. Marc Schillinger | | | Hot Money | CMBS 2.1 Several New York Managing Directors have graced the halls of GSP over the last two weeks, supporting their need for stabilized product. One Investment Bank has signaled us within two hours of going-to-press that they are seeking to fund $100,000,000 by year-end. Spreads remain stable as SWAPs have compressed, netting all-in coupons from 5.60% to 5.90% for 10-year fixed rate non-recourse debt. Acknowledging that they can not compete with the insurance company rates, CMBS originators are willing to offer loans down to $5,000,000, fund in tertiary markets and address non-traditional loan requests including hospitality and single tenant leases. Loan to Values as high as 75% are obtainable prior to layering on mezzanine debt. Mezz-debt is available on larger loan requests. | | | 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. | |
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