| | Sid Wallis, July 27th, 2012 | A Tribute to Sid
Sid was unique in many ways. Born and raised in Los Angeles, he was one of the few who really called Los Angeles "home", leaving only for college and two years in the Navy. Sid experienced most of life bouncing all over Los Angeles, watching the city grow and expand by the decade. He would often share stories of his youth in the 1930's, riding the Red Car to Santa Monica. He used to joke that was a day trip back then because it took almost the whole day to get there from East LA. He would add that not much has changed in that regard. In 1968, Sid met George Smith when Sid was working for Sonnenblick-Goldman and was tasked with financing the office building in which George worked. George was impressed. He did all the work yet Sid got the fee… Through the following four decades and various corporate iterations, Sid and George were united in various rolls. Their last venture provided the roots to what is now George Smith Partners, Inc. GSP just celebrated its 20th Anniversary. Sid was proud of what he had a hand in creating - but it was so much more than a business – it was the people who made up the firm that gave Sid joy. As a mentor and advisor, Sid trained many of us on how to be successful. He was known for his back-of-the-envelope underwriting and constantly proved that this career was so much more than numbers, it was people. He would constantly chastise Gary Mozer to "Grab some blue-books and get out and talk to lenders."
As a great-grandfather, Sid left behind four generations of family. He also left a dozen of generations of real estate professionals. We will all miss you Sid. And to you, we close down our excel spreadsheets, open up our slide-rules and underwrite the next transaction on the back of an envelope. | | Transaction of the Week |  | |  | | Transaction Description: | | $12,500,000 Refinance of a Single-Tenant Building w/4 years Remaining George Smith Partners placed the refinance of a single tenant office building leased to the County of Los Angeles. The current lease had four years remaining on the term prior to lease-options. The current loan was sweeping most available cash flow to pay down principal. The Borrower requested a term loan that would allow cash flow after debt service. |
Challenge: The single-tenant nature of the asset and shortness of the remaining term ruled out CMBS and LifeCo term options. The size of the loan request precluded most local and regional banks from reviewing the request. The Borrower had also requested a fixed rate term beyond five years, outside of what most banks will offer. |
Solution: GSP identified a local portfolio lender who understood this agency's requirement to be physically located in this market. The agency was well established, having a long history at this location. GSP conducted a broad market search for similar assets and could not identify a similar building within this trade area – providing the lender with comfort that the tenants' future options were few. The lender concluded the risk of non-renewal was very low. | | | | |  | | | | Bridge to Perm GSP identified a Life Insurance Company funding true bridge-reposition assets down to a break-even cash flow at funding. The loan is fixed at close with up to two years interest only, priced from 5.0% to 7.0% depending upon the asset type & term. The remaining 5 to 8 years will amortize over 25 to 30 years. A secondary funding may be considered upon stabilization. Recourse may vary from full repayment to burning-off at stabilization. Properties are traditionally the primary four products plus hospitality with an emphasis on multifamily. No construction will be considered at this time. Loan requests will range from $15,000,000 to $50,000,000. | | | | Hot Money | Joint Venture and Preferred Equity A former debt fund has repositioned itself for wider returns and is now underwriting new Joint Ventures, Preferred Equity and Participating Senior Notes. DPOs are high on their radar as well as residential lots. They will consider special purpose assets with viable exit strategies. The fund's niche is middle market transactions in secondary locations. Ground-up construction will be underwritten on a very selective basis. Returns start in the low teens for transactions of $4,000,000 or more. | | | 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. | | | Pascale's Perspective: | Fed holds steady, ECB meets tomorrow, Congress avoiding government shutdown This summer is much like last summer with investors looking towards central banks and governments for relief from stagnant growth and uncertainty. The US Fed stayed its recent course: aware of global economic slowdown, will keep rates at historic lows "as long as necessary" (ie at least until early 2015 it seems), but is not implementing further quantitative easing. ECB: Markets rallied last week as the central bank and leaders of Germany/France endorsed "whatever it takes" actions to stabilize the Euro. Some optimism was damped by the German Bundesbank's comments today calling for limited action. Tomorrow's meeting may provide more clarity as to what's next—ECB purchases of sovereign debt? I want to dedicate my column today to Sid Wallis, my longtime "cubicle neighbor" and friend. I started here in 1995, Sid was still active and doing deals. His wisdom and perspective were invaluable to me. He always had a kind word, a joke, and good advice. We followed the Dodgers together. Sid would attend games in a Brooklyn Dodger cap. Above all, he was a gentleman and devoted to his family. I learned a lot from Sid and will miss him but not forget him. Thanks Sid…… | |
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