| Transaction of the Week |  | |  | | Transaction Description: | | $23,000,000 Cash-Out Refinance of an Operating Marina and Boat Yard GSP successfully placed the cash-out refinance of an operating marina and boat repair yard in Fort Lauderdale, Florida. The property is half owned in fee, half owned in leasehold with the local municipality. The non-recourse loan will be amortized over 18 years to allow for a 10 year hang-out from the ground lease. Pricing was SWAPs plus 350 for the fixed 10-year term. |
Challenge: The unique product type is widely viewed as an operating company cloaked in real estate, not unlike a hotel. Institutional lenders are familiar with hospitality whereas few have first-hand experience with an operating marina. |
Solution: GSP blanketed the permanent debt market and identified a CMBS Lender who understood and appreciated the property and its long-term, stable historical performance. This is one transaction where the asset truly sold itself. Once the Lender "kicked the tires", decision makers immediately fell in love with the asset and the operations. The unique property type was mitigated with the operational strength of the sponsor and lengthy ownership history. Ten years of monthly historical cash flow was underwritten demonstrating consistent collections throughout the economic down-turn. GSP successfully closed with the Lender in 32 days. | | | Rate: 5.52% | | Term: 10 Years Fixed | | Amort: 18 Years | | LTV: 50% | | DCR: 1.35 | | Non-recourse | | Lender Fee: Par | | Broker: David Stepanchak | | | |  | | | | New $200,000,000 Equity Fund Roll-Out A national private Joint Venture Equity provider will be launching a new fund next week targeting total capitalizations from $10,000,000 and up. Equity contributions as small as $3,000,000 will be considered on a 90/10 co-invest. Story transactions with some cash-flow in place are being underwritten to a high-teens/low-twenties IRR for up to a five year hold. DPOs are also considered with a fresh capital injection from the Borrower. Their typical developer/partner is a smaller shop although institutional clients have also utilized their funds. Ground-up developments are not available under this program although assets requiring construction completion will be considered. | | | | Hot Money | Mezzanine Debt: Stabilized or Bridge/Reposition Assets Several capital providers are affording higher leveraged transactions with a tranche of internal Mezzanine Debt for stabilized assets as an offering to investors seeking higher levels of senior debt. This presents a win/win as the lenders are securing additional originations while subsequently adding to their over-all yield. One-stop-shopping for 85% leveraged transactions is offered by Wall Street as well as a small handful of Life Company funders. The higher yielding tranche is wrapped with the senior note for a negligible increase in the total coupon. Borrowers seeking higher debt levels on transactional assets are also witnessing a larger appetite for Mezz Debt and/or Pref Equity levels. Larger assets slated for reposition may obtain total leverage up to 90% with a mid-teens IRR on the most senior tranche. Mezz/Pref Equity allocations for turn-around assets should be at least $5,000,000 for terms of 2 to 7 years. Ground-up construction Mezz/Pref Equity requests are currently limited to pre-leased transactions. | | | 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... | Founding Partner Gary M. Tenzer was recently quoted by GlobeSt.com on negotiating loan modifications with servicers. More on the topic may be found in the article here. | | | California State-Wide Multifamily Trends | As conference season is in full swing, many symposiums are focused on California's Housing Sector. The following is part 1 of a 2 part summarization of several events recently attended around the state. ECONOMY At 180,000 new jobs added, California is 2nd (behind Texas) in adding jobs over the last 12 months. The Golden State was paced largely by the Bay Area where San Jose has the strongest wage growth for five straight quarters. Multifamily Rental Rates exploded with a 16% increase in San Francisco alone. As the multifamily market prospers, Fannie and Freddie lost a whopping $10 Billion (nationwide) last year alone – all of it in SFR. Only 24,000 SFR permits were issued last year in the entire State, 10,000 of those in Los Angeles. Because so many buyers have been forced to the side-lines, apartment occupancy has spiked. Nowhere is that more evident than in Santa Monica where year-after-year rent growth has topped 4.8% with the highest state-wide average rent per door of $2,960. GENERATION Y? CONGRATS; YOU ARE BROKE! The most fascinating statistic: The average Total Asset Value of US individuals under the age of 35 is $20,000. With credit card debt, student loans and possibly a foreclosure on their record, Generation Y (defined as ages 22-31) and the tail end of Generation X is collectively broke. But people ages 22-35 also tend to have good jobs and like lifestyle living, and are willing to pay for it to be close to jobs and maintain a residence they can be proud of. These factors are the primary drivers behind the spike in Class A rates. Developers are now designing buildings with smaller units (450 SF for a studio) but more amenities with recreation rooms, gyms, and outdoor common areas people can enjoy in the community. The question facing developers: will this demographic stay in a smaller unit? Or will this present a problem as renters increase mobility, and/or seek more comfort? Or is this problem mitigated by the growing number of college grads who re-leave the home once they have their first jobs? These are several questions facing developers in today's paradigm. I will summarize existing cap rate projections and discuss development costs in next week's FINfacts. Jonathan Lee | | | Pascale's Perspective | A Quarter Trillion Dollar Twist – The headline driven markets got exactly what they were expecting today, no more, no less. Operation Twist (the Fed selling short term bonds and buying long term bonds to flatten the yield curve and keep long rates down) will continue with the Fed selling about $260 billion of short and buying the equivalent of long. The Fed has kept short term rates at rock bottom since late 2008. The Fed will also consider "QE3", further quantitative easing, if necessary. Treasuries held steady at their historic lows. The Greek elections and subsequent pro-bailout coalition formation has calmed the "risk" markets (for now) with attention now turned to Italy and Spain. This buys time for Europe, but how much time? CMBS spreads continue to stabilize, so very little volatility over the past week in the index and spread worlds… ...stay tuned... David R. Pascale, Jr. | |
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