| Transaction of the Week |  | |  | | Transaction Description: | | $8,000,000 Cash-Out CMBS Financing for a Los Angeles Industrial Property. GSP arranged the non-recourse, cash-out loan on a 165,000 sq. ft. industrial property in Gardena, (Los Angeles) California. The property consists of seven separate adjacent concrete tilt up buildings constructed in the 1970's, and contains a mix of both warehouse and flex space. |
Challenge: The Sponsor's objectives were to secure non-recourse financing with maximum cash-out proceeds at the lowest rate available. A high percentage of month-to-month tenancies and near-term lease expirations complicated the underwriting despite the 100% occupancy. The property condition report dictated significant expenditures on capital improvements. |
Solution: GSP identified a number of Insurance Company and CMBS lenders that favor industrial properties. They were therefore able to present competing loan proposals for the sponsor's consideration without the requirement for a repayment guarantee. To address rollover exposure, GSP demonstrated support for the month-to-month tenancies with evidence of strong historical occupancies and excellent market fundamentals. GSP was able to negotiate a lower reserve and holdback, as well as an ability to release a portion of the holdback at closing to purchase required building materials. While in application, GSP worked with the lender to increase proceeds and reduce the interest rate spread to partially offset an increase in the 10-year swap rate. | | | Rate: 10-Year SWAPs + 290 | | Term: 10 Years | | Amort: 30 Years | | LTV: 67% | | DCR: 1.34 | | Non-recourse | | Lender Fee: Par | | Brokers: Gary M. Tenzer, Eli Wexler | | | |  | | | | Another Bank has Re-Entered the Commercial Real Estate Lending Market. George Smith Partners executed a dozen transactions with this California Regional Bank just prior to the downturn. Although healthy, the bank withdrew from the commercial lending market. They recently re-entered as a commercial lender, with a former GSPer serving as a senior loan originator. Terms for California-based assets and California borrowers are $1,000,000 to $7,000,000, SWAPs + 350 for 5 years, to 75% LTV. Full recourse is required although cash-out will be permitted if some cash equity remains in the transaction. Major bridge/reposition and ground-up construction will be considered on a case-by-case basis. | | | | Hot Money | Smaller Portfolio Lenders Expanding their Programs Smaller local and regional banks are looking to diversify portfolios as stabilized multifamily market competition continues. Small banks are competing with Fannie, Freddie, regional, and national banks for stabilized multifamily product. As a result, yields continue to be driven down for a dwindling product supply as many apartments are locked-up on 10 year loans. More lenders are now looking outside the box, and will consider construction, bridge/reposition, commercial and special purpose assets priced at traditional bank yields. George Smith Partners has identified a local bank willing to lend $1,000,000 to $5,000,000 on stabilized multifamily on a national level. This same capital provider will also fund significant bridge/reposition requests for commercial assets in Southern California. Ground-up construction will require pre-leasing from an investment grade tenant. Non-traditional commercial uses (hospitality, assisted living, etc.) will also be considered. Coupons range from 4.75% to 6.0% based on product type and borrower strength. Non-recourse is available for sub-50% LTV loans on stabilized assets. | | | 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 | George Smith Partners Principal Gary Tenzer will be participating in a Webinar panel: The Capital Markets Reality Check, a blunt and practical conversation on who is doing what to get deals closed in this economy. Pre-registration is required for the April 26th event. The broadcast will run from 4pm to 5pm followed by an in-person reception in the Westfield Century City Mall. More information and registration is available here. | | | Speakers Corner | Managing Members Steve Bram and David Rifkind will be panel participants on middle-market financing at the National Crittenden Real Estate Conference held in San Diego on April 22nd through the 24th. More information on the conference & panels as well as online registration may be found here. | | | In the News | Globe Street quoted Malcolm Davies, Vice President at George Smith Partners, in an article detailing a recent $25,000,000 equity placement. You can find the entire article here. | | | Pascale's Perspective | More European Trepidation……With the 10-Year Treasury closing today at 1.98%, Treasuries have retreated back to their January and February levels...Why? Once again, the answer lies with the European "fear factor". Recent Spanish debt sales have seen some dramatic spread widening, and there is growing nervousness surrounding the French elections as Sarkozy has been a vociferous advocate of keeping the Euro stable...Domestically, due to the recent appetite for risk among investors, the U.S. Government has been selling large amounts of Maiden Lane securities. (The Federal Reserve created the Maiden Lane entities to hold billions of Dollars worth of AIG-backed paper, which includes AAA mortgage securities. This increase in supply caused some widening.)...Even with these headwinds, CMBS markets have been buoyed as a new securitization pool is marketed to robust enthusiasm among investors...With the 10 Year SWAP at 2.08% today, most new loans are pricing very close to 5% fully leveraged...stay tuned...David R. Pascale, Jr. | |
No comments:
Post a Comment