| Transaction of the Week |  | |  | | Transaction Description: | | $5,000,000 Permanent Financing on a 12,500 SF Retail Center in Santa Monica, California GSP successfully arranged the $5,000,000 ten-year, 5.50% fixed rate loan to finance a fully leased but 80% occupied retail center. The asset is located on a high traffic corner in Santa Monica. Facing a maturing loan, the Sponsor desired a quick, conservative loan to pay off existing debt on the 45-year old building, while also providing close to $3,000,000 cash-out. GSP highlighted the property's prime location and strong history in rapidly securing a non-recourse loan. Due to the low-LTV request, the lender did not require any reserves or impounds. | | | Rate: 5.50% | | Term: 10 Years | | Amort: 27 Years | | LTV: 50.0% | | Prepayment: Yield Maintenance | | Non-recourse | | Brokers: Gary E. Mozer, Michelle Lee | | | |  | | | | Regional Bank From 3.25% Fixed for Northern California Properties. GSP identified a Northern California Regional Bank currently funding high-grade multifamily and stabilized commercial properties. Loan amounts range from $1,000,000 to $12,000,000, and pricing starts at 3.25% fixed for three years. Five-year fixed coupons range from 4.75%-5.25%. Construction and bridge/reposition financing is also available for traditional and special-use assets including elderly care and RV dealerships. Geographic markets start at the Oregon border south to Fresno, inclusive of Reno and northern Nevada, with a strong presence in rural communities. | | | | Hot Money | More Capital than Good Deals! Liquidity is abundant in the private lending bridge market. Several high net worth individuals and families have "suffered" loan pay-offs recently as more institutional capital returns to the debt market. GSP is working with one particular quick-close individual seeking to redistribute capital. Loan amounts will fall between $1,000,000 and $10,000,000, priced in the 7% to 8% range on cash flowing assets. The interest-only loans will be for a term not to exceed 18 months to 60% LTV. Higher LTVs are obtainable for strong recourse borrowers. Commercial assets require a phase 1, although no appraisal or property condition report is needed for funding. Lender fees range from 1% to 2%. | | | 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. | | | IMN Equity Conference Feedback | Steve Bram attended the IMN Real Estate Opportunity Fund Investing Conference at the Montage Hotel in Laguna Beach last week. This conference was their largest event to date. Participants represented Real Estate Funds or related businesses, and generally held an optimistic outlook for 2012. Presenters agreed that the downturn is over, but most felt we would have 2-3 years of slow or no growth. Large US Institutional investors have pushed out underwritten rent bumps from 2012 to 2014. All funds were having difficulty finding good product to buy, saying that 15-20 identical bids were made on any institutional asset listed for sale. And even though the dollar is weak, foreign buyers have no place to invest, adding to the competition for American assets. 2012 will be a year of the "haves" and the "have nots" – overleveraged assets still can't get done, but properties with the right leverage will lock rates at historic lows. And lenders are finally selling notes. Many lenders now see that they should have sold impaired notes in 2008, as prices (values) continued dropping. Many lenders can now afford to sell notes at a discount today because they have been reserving for 2-3 years. And the July/August 2011 dip in prices scared many lenders, reminding them that prices could fall again. Lenders have accepted that prices may stay flat (or could even go down again), and are now selling more notes. Funds in the land market see this as a "generational opportunity" to buy land. Values will improve, albeit very slowly.
The panel on "How to start a new fund" left us feeling that it is more difficult today than ever to start a new fund. Investor's current fund advisors can't find sufficient deals, so why should investor's go to new unknown sponsors. To start a new fund, it takes a devoted senior executive 18-24 months of legal preparation and road shows to hundreds of potential investors. Some sponsors start small going to a fund for capital, high net worth Individuals or family offices, as institutions won't invest with a start-up. Sponsors must contribute a meaningful amount of their own cash. Formation costs run from $300,000-500,000 to start a fund, and the lead investor may ask for better splits or piece of sponsor's side of deal. Joint Venture Capital presents a much more viable option for an equity raise. | | | Pascale's Perspective | 2012: Transactional Volume…When is the REO avalanche? Investors have been waiting for the predicted plethora of commercial transactions from institutions: lender owned, CMBS servicers, note holders, etc. There is some anecdotal evidence that some of these properties are starting to hit the market. As the economic recovery is proving to be less than robust and inflation near zero, most properties will only be able to raise rents with some type of reposition. Most institutions are not funded or staffed to renovate and lease up. Without cap-rate compression, now may be as good a time as any to sell as potential buyers can obtain well priced financing. Look for selling pressure this year at each quarter end, fiscal year end, etc. Fed watch: The Fed "stood pat" in its meeting today, no new quantitative easing. However, they indicated that "accommodative policy" aka rock bottom rates will be in effect until late 2014 or early 2015. This would constitute a 6 year period at a near 0% discount rate, like so many things these days, it's unprecedented. ….stay tuned… David R. Pascale, Jr. | |
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