| Transactions of the Week |  | |  | | Transaction Description: | | $4,000,000 Forward Commitment for a 100% Leased/80% Occupied Shadow Anchored Retail Strip Space GSP arranged a Forward Commitment for the retail pads and in-line stores of a Lowe's shadow anchored center in a Southern California coastal city. The borrower redeveloped a large, functionally obsolescent, 1960's vintage, retail center. He razed most of the structures, then building ground-up, added Lowe's and new in-line retail square footage. The Borrower requested a permanent loan with a 6-month forward rate-lock, fearing that rates would increase during his construction phase. Although all leases were fully executed, none of the tenants (including Lowe's) were operating at the time of the rate-lock. The lender locked rate in July 2011 and recently funded the loan although not all tenants were in occupancy. There was no premium add-on for the 6 month forward. The collateral consists of 21,000 s.f. including a fast food restaurant and an auto-parts store, both on their own pads. Several tenants changed location within the center to accommodate the new design. | | | | |  | | Transaction Description: | | $1,500,000 Acquisition Financing of Coastal Restaurant & Apartments George Smith Partners successfully placed the 90% LTC financing on the acquisition of a coastal restaurant and apartment property. The loan provided capital to allow the sponsor to redevelop and reposition the restaurant to a novel new concept. |
Challenge: Capital providers were concerned the change in branding would negatively impact the cash flow. The sponsor required the maximum proceeds to cover all capital improvements and complete their rebranding. |
Solution: GSP supported the higher leverage by accenting the value of the stabilized apartment units as well as the equity of the liquor license. GSP confirmed that these additional assets substantially supported the restaurant and provided the additional collateral for the loan. | | | Rate: 6.72% | | Term: 10 Years | | Amort: 30 Years | | LTC: 90% | | Recourse | | Broker: Malcolm Davies | | | |  | | | | 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. | | | | Hot Money | Non-Recourse Reposition Bridge Lender Funding Below Breakeven DCR. A national capital provider has rolled out a non-recourse reposition bridge program funding transactions below break-even coverage. The lender is actively funding retail, industrial, and office properties and will consider hospitality. Total loan-to-stabilized value of 80% for loans from $10,000,000 to $50,000,000+ are advanced at LIBOR + 500 to 600 bpts with no floor. The lender will charge a 1 point or less origination fee with no exit fee. | | | 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. | | | Notes from the MBA | Senior Vice President David Stepanchak attended the annual Mortgage Bankers Convention this week along with approximately 2,000 Mortgage Bankers, Due Diligence Vendors and Capital Providers. The overall tone was genuinely optimistic. Prior-year conversations centered on future production, while this year's meeting had producers reviewing actual funded transactions executed over the last 12 months. Although pipelines are robust, there is still substantially more capital to be invested than there are quality transactions. Economy: Europe will have a less volatile impact to the U.S. over the short term. Long term issues will still prevail, but U.S. investors are becoming desensitized to the news coming out of Greece, Spain & Italy. CRE loan maturities will more than double over the next four years. The Capital Markets are stepping up but $100 Billon of new capital (ie fresh cash-in) and/or more DPO pay-downs will be needed to fill the void. CMBS: Spreads will continue to tighten as more pools execute and the market embraces their attractive yields compared to other investment alternatives. Debt Yields will only move slightly if at all. Rating agencies will require the TI/LC reserve structures in place going forward, that were underwritten but not actually reserved five years ago. "CMBS 3.0" will grow and become more robust with more public issuances. LifeCos: Whole loans have been less volatile than the CMBS paper regardless of the loans' performances. Many portfolio lenders hit peak levels in 2011; although these originations are actually normalized levels. Look for more LifeCo production in 2012 as they expand products, ie multifamily construction to perm debt. Sub-Debt: A flurry of capital providers are now offering external mezzanine debt and pref-equity. Several are branching out to cover ground-up construction to 85% of cost, non-recourse. Yields behind the very inexpensive senior debt still nets all-in coupons sub-6% fixed for 10 years. Summary: 2011 was good but 2012 will be better – more money than good deals. Quoting one capital provider: "I have money that needs to be spent". Rates will continue to compress but senior loan quality will still remain near or at current underwritten levels. | |
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