| Transactions of the Week |  | |  | | Transaction Description: | | $7,787,000 Office Acquisition and Major Rehabilitation Loan GSP arranged a $7,787,000, 90% loan-to-cost acquisition and rehabilitation loan for a single tenant creative office building in Burbank. The 30,276 square foot building will be home for a post-production company that specializes in closed captioning, color correction, contrast fulfillment, and video editing. A significant portion of the loan proceeds will be used to fund a custom build-out for this special use. |
Challenge: The Borrower engaged GSP to identify a lender with the best loan-to-cost ratio and the highest probability of close. It was also the Borrower's preference to have a significant percentage of the loan fixed during the construction period. The construction budget was a substantial percentage of the purchase price, resulting in an uncertain stabilized valuation. The committed-to loan is $257 per square foot. |
Solution: GSP structured a construction loan into a 1st and 2nd trust deed. By fixing the $4,331,510 first trust deed at 4.50% (2.50% + 10 Year Treasury), fluctuations in interest rates are mitigated during the construction period. GSP was also able to negotiate a 20 year term to avoid a maturity after the fixed period. The $3,455,208 (to 90% of total cost) 2nd trust deed is structured with interest-only payments during construction and a flexible draw schedule. This portion of the loan converts from 3.75% + 30 day LIBOR (4.00% at funding) into a 20-year fixed, 4.65% self-liquidating loan immediately upon Certificate of Occupancy. The 2nd trust deed does not require additional fees at the conversion from the floating to the fixed rate. | | | | |  | | Transaction Description: | | Los Angeles Single Resident Occupancy (SRO) Funded Bryan Shaffer recently closed his third Single Resident Occupancy (SRO) transaction in downtown Los Angeles. The three loans are not crossed-collateralized or cross-defaulted. SRO usage presents a challenge for most lenders, due to the fact that they are not traditional housing units. Kitchens and bathrooms are shared, similar to a dormitory. SROs provide a valuable option for low income tenants who cannot find affordable multifamily units in urban markets like Center City Los Angeles. With the economic downturn, more students are also seeking SRO housing. Mr. Shaffer identified several mission-driven portfolio lenders who understand the floor-plan metrics and typical property tenancy of SROs. The diversified lending pool allowed the three transactions to vary as to operational status. They ranged from gut rehab (zero occupancy) to cash-out stabilized refinance on a 10-year fixed rate term. The three funded transactions totaled $14,000,000 over 350 aggregated units. Bryan is currently processing three additional SRO loan requests that total $10,000,000 of new financing. | | | Rate: 5.75% | | Term: 10 Years | | Amort: 30 Years | | LTV: 70% | | Prepayment: 3,2,1, open | | Lender Fee: 1.0% | | Broker; Bryan Shaffer | | | |  | | | | National Fixed Rate Portfolio Program w/Flexible Prepayment A national capital provider has just launched an on-book fixed rate program with flexible prepayment options. For stabilized core assets, this non-LifeCo format will fund to 75% of value and down to a 9% debt-yield. This program is an ideal alternative for CMBS quality assets that may present a future development opportunity. Transactions are non-recourse and will range from $8,000,000 to $100,000,000. Five year fixed starts at 5.5%, and requires three years of yield maintenance. It is then open to prepayment for the last two years without penalty. Seven year fixed starts at 5.75%, and carries five years of yield maintenance before becoming open to prepayment. | | | | Hot Money | Life Insurance Companies Continue to Compete Major Life Insurance funders (loan amounts of $25,000,000 & up) continue to compete with CMBS originators, and are now looking to win opportunities with more than just pricing. Many LifeCo's are branching out and extending product lines to entice borrowers. Below-market yields for moderately and low leveraged assets has always been a staple of Life Funders. The recent Treasuries slide has only benefited LifeCo's as Wall Street providers are locked with SWAP rates that have been less responsive to the European financial fluctuations. Today's 10-Year fixed rates start as low as 3.75% for several Insurers. New LifeCo offerings include long-term LIBOR-based floaters that require little or no pre-payment penalties. Fixed rate loans may now offer flexible pre-payment opportunities as well at a substantially lower cost than yield maintenance. Supplemental fundings can be structured, avoiding the need for refinancing to access trapped equity. One national funder has recently launched a multifamily bridge program as a feeder for perm-debt upon stabilization. Life Companies continue to compete with products that only portfolio providers offer. This includes the no-cost capacity to lock rate and spread at application and the offering of forward commitments. | | | 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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