| Transaction of the Week |  | |  | | Transaction Description: | | $5,000,000 Facility Collateralized by Los Angeles Residential Rental Properties George Smith Partners successfully placed the $5,000,000 facility to fund pools of residential properties (1-4 units) leased as rental investments. The renovated and fully occupied residential properties are located in Los Angeles County including some rougher neighborhoods. |
Challenge: Because of the unique product and loan type, the terms of the loan agreement had to be drafted organically from the ground up. These pools included properties in class c/c- neighborhoods and Section 8 (HUD) tenants, neither of which are attractive to many capital providers. The Sponsor purchases properties at a significant discount to market through various distressed channels such as short sales and trustee auctions. As a result, the loan represented a significant return of equity and in some instances the Loan amount exceeded the purchase price of a specific property. Placing security interests on each home purchased in a portfolio of hundreds presents a logistical nightmare for both the Lender and Borrower. |
Solution: In order to secure the financing, GSP educated the lender about the diversity of the product and tenant base and demonstrated the strong operating capabilities of the Sponsor. Ultimately the Lender became comfortable with the structure and a limited loan to cost restriction. The Lender secures its interests in the properties by way of a blanket deed of trust - an efficient and streamlined process with individual assets free from any liens or encumbrances. | | | Rate: 5.0% for 5 Years; Prime + 0.5% thereafter | | Term: 10 Years | | Amort: 25 Years | | LTV: 65% | | LTC: 80% if purchased in last 12 months | | DCR: 1.25 | | Prepayment: 5,4,3,2,2 | | Recourse | | Lender Fee: 0.75% at time of advance | | Broker: Omer Ivanir | | | |  | | | | Mezz Debt from $3,000,000 GSP identified a private New York Hedge Fund with discretionary capital for mezzanine debt on performing and slightly under performing assets. Transactions funded from $3,000,000 and up to an 80% LTV and 1.10 actual dcr. No major rehab will be considered but some light "value-add" will be underwritten. This fund has the ability to fund behind select existing fixed rate transactions, mitigating the requirement to unwind the senior debt to gain access to capital. Loans terms will be co-terminus with the senior note. Yields start at 13% for core product types in addition to more specialized assets including mobile home parks and data centers. Secondary and tertiary markets will also be considered for financing. | | | | Hot Money | Exceptionally Liquid Community Bank Expanding their Presence GSP has identified a Los Angeles based community bank opening their balance sheet to investor and owner/user developers. This recourse lender will fund anywhere in California or the lower 48 for California based borrowers. Bridge, Permanent and Construction financing is available up to $7,500,000 per borrower to 75% LTV for multifamily & owner/user and 70% for commercial assets. Pricing varies widely depending on loan type, term and borrower strength. 10-Year fixed rate funds are available for stabilized assets with a step-down prepayment, open after the 5th year. A depository relationship is requested but not a requirement to execute. | | | 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 | Treasuries, Fed Watch, etc….. The spike in Treasuries was short lived, after hitting 1.92% in mid-August; the 10 year is back down to 1.59%. Bond buyers were cheered by Bernanke's Jackson Hole speech where he vigorously defended past stimulus efforts and seemed to lay the groundwork for more quantitative easing. Last week also saw comments from the Chicago and Cleveland Fed Governors debating the pros and cons of stimulus. The timing of the mid-September Fed meeting is historically significant. With the Fed's role become increasingly politicized in this election year, it will be a chance for Bernanke to show that he is not "bowing to political pressure" by acting decisively in the last major meeting before the election. This meeting will also feature a press conference for Bernanke to articulate his thoughts. This Friday's employment report will be very closely watched as the last major piece of data pre-meeting. …stay tuned… David R. Pascale, Jr. | |
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