| Transaction of the Week |  | |  | | Transaction Description: | | $1,360,000 Office Building Cash-Out Refinance to 80% LTV Shahin Yazdi successfully placed the 80% loan-to-value cash-out refinance of construction contractors' corporate headquarters in Ann Arbor, MI. Proceeds from the conventional loan (non-SBA financing) were reinvested into the operating company for capital upgrades. The loan will float over LIBOR for five years, and amortized over 20 years. |
Challenge: The Sponsor's primary source of repayment is through construction operations, which is not an attractive industry to lenders in this financial environment. Sales dipped significantly in 2009 & 2010. The appraisal came in below expectations and jeopardized loan proceeds. The Borrower required a return of capital through this refinance. |
Solution: The Borrower proved a robust 2011, off-setting the prior two years of declines. An increase in future operational cash flow was demonstrated as orders placed in prior years were re-booked for 2012 and 2013. The Borrower has a +30 operational history, having survived several prior market downturns. The Lender agreed to increase the LTV constraint from 75% to 80% in order to accommodate the requested loan proceeds. The Lender became comfortable in the use of proceeds in order to better facilitate future earnings of the construction company. | | | Rate: LIBOR+300 | | Term: 5 Years | | Amort: 20 Years | | LTV: 80% | | Recourse | | Broker: Shahin Yazdi | | | |  | | | | Bridge Financing from Money Center Banks Several Money Center Banks have opened their balance sheets traditionally reserved for existing customers to finance bridge/reposition assets and selective ground-up construction projects. Although non-recourse options are more the exception than the rule, they are quoting low LIBOR +250 terms on an interest only basis down to a break-even going-in coverage. The driving motivation for these portfolio lenders is to position Bridge transactions for a CMBS execution upon stabilization. The banks are utilizing their balance sheets as a feeder for CMBS product. Assets are limited to core products and select healthcare uses. Requests will range from $10,000,000 - $75,000,000 to 75% of current value. Some cash flow must be in place at funding for reposition assets with stabilization & exit anticipated within three years. | | | | Hot Money | 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. The lender may consider a secondary funding 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. | | | 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. | | | Search FINfacts Tombstones | The GSP website has been updated to include a search feature where prior closed transactions may be searched by loan type or asset type. All transactions are posted, starting from the most recently published. Loan type options include Construction, Bridge, and JV/Mezz, while asset classes include Single Tenant, Retail, Office and others. Please visit our website at www.GSPartners to search recent transactions funded over the last 18 months. | |
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