| Transactions of the Week |  | |  | | Transaction Description: | | $21,000,000 Credit Tenant Lease (CTL) Financing for 152,000 s.f. Lowe's in Secondary Market GSP arranged CTL bond financing for a newly constructed Lowe's Store and Garden Center. The Borrower owns the fee and leased it to Lowe's on a 20 year ground-lease. The Borrower redeveloped a large, functionally obsolescent, 1960's vintage, retail center to accommodate the new Lowe's as well as reposition 21,000 s.f. of in-line retail space. Most structures were razed as several tenants were relocated to new locations. A 10.65 acre site was cleared for Lowe's, who then built their own 120,000 s.f. store with a 31,000 s.f. garden center. GSP previously arranged the construction financing in November 2010 which financed the demolition, pad construction and pad preparation. This permanent financing was arranged through an investment bank specializing in bond placements for large institutional investors in order to maximize loan proceeds. The lease's bond structure and the tenant's strong credit allowed the investment bank to underwrite to a 1.01 DCR. This was the 18th financing arranged by GSP for this client. | | | | |  | | Transaction Description: | | $7,000,000 Non-Recourse Acquisition & Reposition for a Tertiary Regional Mall Financing closed from start to finish in 10 days. This underperforming retail asset was operating at breakeven cash flow, but carries an incredible potential for redevelopment. Although the Borrower held expressions of interest from numerous potential tenants, no leases were negotiated or executed by funding. The financing allowed the sponsorship to acquire the property from a bank within a compressed timeframe, and included an additional capital funding + interest reserve to support the loan during lease-up through the redevelopment and entitlement process. |
Challenge: The Borrower committed significant non-refundable deposits to the seller, mandating the certainty of close. This acquisition required a quick close as the new owners' business plan included multiple reposition/redevelopment scenarios with both demand and entitlement risk. No "warm-body" repayment guarantee was available for the new financing. |
Solution: GSP relied heavily on its relationship with the Lender and access to the primary decision makers. This produced a loan with a mechanism that incentivized the Sponsor to successfully execute the business plan and compensate the Lender for the perceived market risks. The Lender understood the "story", and quickly evaluated the in-depth market information provided by the Borrower. The Lender and Sponsor worked in good faith without formalized business terms in order to expedite and close the acquisition by the Seller's drop-dead date. Sponsorship expertise in this market was crucial in securing the non-recourse debt. | | | | |  | | | | Northern California Bank with Life Company Pricing from $1,000,000 George Smith Partners is currently closing stabilized debt requests in Northern California with a regional bank local to that market. Ground-up construction requests are also being underwritten at this time. The capital source's conservative credit culture allows them to price aggressively, often undercutting more arduous Life Company applications. Ten-year transactions to 60% LTV sized from $1,000,000 to $25,000,000 are priced from 4.35% - 5.00% fixed, and offer stepped-down prepayment. Their geographic lending market consists of The Bay Area north to the Oregon Border. Non-recourse financing is available to higher quality assets. | | | | Hot Money | National Bank Funding 40 Year Amortization on Multifamily A national portfolio lender is currently funding 5 to 50-unit, Class A and B Multifamily properties to $10,000,000. The Lender may advance up to 70% LTV, with a maximum leverage of 80% on acquisitions. The recourse loans are fixed for 10 years in the 5% to 5.25% range prior to floating over LIBOR. All loans may self-liquidate over their term, but offer a step-down prepayment structure during the 10-year fixed rate term. Properties that are 15 years old and newer qualify for a 40 year amortization, while older assets receive the traditional 30 year schedule. | | | Pascale's Perspective | Treasury Rates & China: Treasuries rallied again today, 10 year yield at 1.93%, as doubts on Greek bailout parameters send investors to the safe haven of US Treasuries. Interesting news from China: (1) They are going to look to buy more European bonds in order to help stabilize the markets and get a higher yield than Treasuries, etc. (2) China believes that the Fed will embark on another round of quantitative easing. The release of the Fed's recent minutes today shows lack of consensus. They seem to indicate a split on whether to embark on QE3 if unemployment spikes again. Hawkish views such as Dallas Fed Governor Fisher are emerging: He said that American businesses need to see action from Congress, not the Fed to stabilize the economy and that QE3 would only be appropriate as an emergency measure in case of deflation or another "unforeseen crisis". Also controversial among the governors is the recent Fed statement indicating rock bottom rates until late 2014 or early 2015. All this is good news for borrowers these days, as credit spreads are stabilizing and tightening (for now)…. …Stay tuned… David R. Pascale, Jr. | | | 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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