| Transaction of the Week |  | |  | | Transaction Description: | | $4,200,000 Distressed Note Acquisition GSP arranged hypothecated debt financing for the acquisition of a distressed senior note. The 1st Trust Deed for the 60-unit multifamily property was being serviced, but had matured. As a part of a broader balance sheet clean-up effort, the bank intended to sell off the 1st Trust Deed. Due to deferred maintenance and temporary management problems, the note was acquired at an approximate 25% discount to face value. The underlying collateral promises significant upside with tighter controls and a light renovation. |
Challenge: The Purchase and Sale required an 18-day close with deposits hard day one. Certainty of execution and expedience was paramount. High leverage, non-recourse debt was required. The property owner filed a personal bankruptcy that entwined the underlying collateral of the note. |
Solution: GSP called on a close relationship with a dependable and sophisticated private lender with expertise in bankruptcy and note acquisitions in order to assure a smooth closing. GSP worked with four separate legal teams to perform due-diligence, negotiate documents, monitor the bankruptcy process, and close the purchase. The note buyer anticipates collapsing their position to assume control of the fee, stabilize the asset, and refinance with institutional debt within one year. | | | | |  | | | | National Bridge to Perm GSP is closing transactions with a national funder of non-recourse bridge loans with a 1.0 or greater going-in debt coverage ratio. This capital provider will also offer a portfolio take-out upon stabilization for transactions over $10,000,000. This is not a forward commitment, and there is no exit fee if their take-out is not executed. Bridge Terms are from $10,000,000 to $50,000,000 priced at LIBOR+450/500 with no floor. The three to five year floater requires a one point lender origination fee. The on-book permanent take-out will be sized and priced at then market conditions upon stabilization. | | | | Hot Money | 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. | | | 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. | | | SoCal Media Tech Leading a Transformation in Office Space | Creative office is hot. Los Angeles is gaining ground on the Bay Area for tech tenants, as media and entertainment (bastions of the LA economy) are becoming synonymous with tech. Rents are increasing, but not without a sensible governor provided by limited capital and a post-crash emphasis on profitability. Vacancy is low, pushing rents up and driving expansion of the core "Silicon Beach" market area. Santa Monica (3rd Street Promenade and surrounds) is ground zero, but Culver City, Marina Del Rey, Playa Vista, and El Segundo are only a step behind. Key drivers are the new ways companies are using office space to 1) improve the performance of creative teams, 2) compete for the best talent, and 3) reduce real estate costs. Tech tenants want flexibility, namely in the form of short term leases, and the ability to adapt as their start-up businesses succeed and fail. Their Gen Y staff wants a casual open environment in the middle of the action so they can share information and jump between employers easily. Apparently the office market is in for a radical shake-up, and it is coming fast. These models will bleed into corporate America quickly as youth and technology take an increasingly influential role in the professional world. The evolving attitude to "workplace" among the avant-garde is not constrained to Santa Monica. This culture will permeate wherever the Internet is found. Steven Orchard | | | In The News | GSP Vice President Marc Schillinger was recently quoted on small multifamily financing in Multi-Housing News OnLine. To read more about funding apartment transactions from $750,000 to $5,000,000 click here for the entire article. | | | Pascale's Perspective | Market uncertainty drives bonds: Massive market uncertainty has investors pouring in to "Safe Haven" Bonds. The US 10 year T is at 1.61%, an all time low. German 10 year bonds are yielding 1.27%, France and Japan bonds are yielding sub 1%. Interestingly, investors are shunning commodities such as gold, oil, etc. This fear trade is due to uncertainty over a potential (certain?) Greece exit from the Euro. Banks and governments are already running contingency plans and "war gaming" for this eventuality. The war gaming scenario has Greece announcing a return to the Drachma on a Friday after NY markets close and completing a (hopefully) orderly transition before the markets open in Asia on Monday morning. All this has investors shunning risk. We are seeing CMBS spreads widen commensurate with the Treasury drop, but they are not blowing out as bonds are selling, but not always at the originators expected spread. With all the volatility, it's a relief that the bonds are selling through… ...stay tuned… David R. Pascale, Jr. | |
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