| Transactions of the Week |  | |  | | Transaction Description: | | $10,000,000 Portfolio Refinance w/ARMs tied to LIBOR and CMT In a demonstration of organized chaos, GSP AVP Jason Gaffner successfully placed 5 separate multifamily loans on 5 unrelated multifamily assets for the same borrower. The portfolio consisted of 121 units located across the San Fernando Valley. The non-recourse loans allowed the sponsor to reduce his cost of carry by over 200 basis-points, while obtaining a small return of equity. Each standalone transaction is fixed for 5 years at 3.85% prior to floating for the remaining 10 year term. The loans are sized to a 1.20 DCR and 70% LTV. |
Challenge: After LOI execution, the Sponsor chose to diversify his long-term floating rate risk. The non-crossing of the transactions required the processing of five separate loans, mandating duplication and logistic controls. |
Solution: As an accommodation to the borrower, GSP successfully negotiated a blend of LIBOR and CMT-based ARMs for each of the five transactions. There was no rate add-on for this additional complexity. GSP worked diligently in communicating lender and 3rd party vendor needs with the borrower. The open lines and constant updates kept all parties informed throughout the due diligence period. | | | Rate: 3.85% | | Term: 5 Years Fixed, 10 Years Float | | Amort: 30 Years | | LTV: 70% | | DCR: 1.20 | | Prepayment: 3, 2, 1, open | | Non-recourse | | Lender Fee: Par | | Broker: Jason Gaffner | | | |  | | Transaction Description: | | $5,250,000 Non-Recourse Regional Bank Cash-Out Refinance George Smith Partners placed the 15 year cash-out refinance of a 3-story garden-style office building in West Los Angeles. The loan amortizes over 25 years, is non-recourse, and carries a 4.75% coupon. The resulting 15-year fixed coupon is lower than the 10-year quotes obtained by the borrower prior to engaging George Smith Partners. |
Challenge: The borrower insisted on the longest fixed rate term available on a non-recourse basis. Life Insurance Companies typically provide the longest fixed rate terms at the most aggressive pricing. This asset, while in an excellent market, does not qualify for Life Company underwriting. The tenant profile of the 60 small tenants made the processing of a cmbs loan untenable with regard to SNDA and estoppel requirements. |
Solution: GSP tapped their portfolio relationships and identified a bank willing to underwrite and fund a non-recourse loan to 60% LTV. They were comfortable with the borrowers' experience and ownership history to allow a small return of capital. GSP demonstrated (i) historic occupancy was 95%+ (ii) an extensive waiting list, and (iii) highlighted the SNDA language in all current leases. On the basis of these facts, the Lender agreed to waive all estoppel and SNDA requirements. | | | | |  | | | | Non-Recourse Bridge Financing from $5,000,000 George Smith Partners has identified a capital provider funding reposition transactions nationwide. The portfolio lender, a mid-states regional bank, will lend on the four primary product types, plus condo inventory backed transactions. The bank will fund from $5,000,000 to $25,000,000 nationally in the top 100 markets on a non-recourse basis. Rates range from 7% to 9% interest only for the three-year term. DPOs and value-add construction will be funded with good news dollars but no ground-up is available at this time. | | | | Hot Money | 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. | | | 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. | | | In the News.... | Several George Smith Partners Officers are making press this week. Senior Vice President Steven Orchard was interviewed by GlobeSt.tv while attending the RealShare Real Estate Conference. Mr. Orchard explained that the increased availability of debt has been driving down the cost to borrow while opening up underwriting criteria. The entire video may be viewed here. Managing Director David Rifkind was interviewed in the April 20th edition of Multi-Housing News. The conversation centered around the various dynamics of the California rental markets. The complete article is available on-line here. | |
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