Bank Consolidation, Weakness in Both the Job Market and Retail Sales

Following weeks of rumors regarding takeover discussions, Bank of America has entered into an agreement to acquire Countrywide Financial. This agreement supersedes a $2 billion capital infusion from BofA to bolster Countrywide’s balance sheet. BofA is acquiring a lending platform which may prove to be very valuable if they are able to work through Countrywide’s existing portfolio of foreclosures and risky loans. The BofA offering for Countrywide involves a $4 billion stock swap, represents a real bargain if Bank of America can utilize Countrywide’s vast borrower base. Consolidation within the banking industry is a real possibility given the current challenges throughout the industry itself.

Other rumored acquisition candidates include Citicorp, PNC, and Washington Mutual. Weak December sales and sluggish job growth reports continue to renew concerns of recession. It is the opinion of many economists that the Fed will be forced to cut a minimum of 1⁄2% in order to stay ahead of a potential recession. The worrisome fall in retail sales has also put pressure on the dollar, which in turn weighs on the Fed to lower rates in an effort to keep inflation at bay amidst many other economic factors currently dragging the economy down.

Given an ongoing cautious atmosphere, borrowers can appreciate some good news: the recent drop in the 10-year treasury to 3.62%; and 10-year fixed rate permanent and refinance debt available at interest rates of 6.00% to 6.50%. We will keep you posted…

Penstar recently received an application for a 35,000 square foot shopping center located in the Midwest. The property is currently 100% leased and was built for cash by the borrower. The lender (an insurance company) provided a 10-year loan, at 250 basis points over the 10-year treasury, 2 years interest-only and 30-year amortization thereafter. The loan is extended to the borrower on a non-recourse basis with the exception of standard carve outs. To discuss, please contact Steven Hamermesh at (818) 883-9609 or Hamer@penstaradvisors.com.

Hot Money
CMBS Loans Available Featuring a Cap on Closing Costs

Penstar is currently working with a CMBS lender extending loans on multi-family and commercial properties located throughout the United States. This capital provider will offer loans on cash-flowing assets ranging from $3 million to $150 million at 260 basis points over the 10 year treasury, 4 years interest-only and 30-year amortization thereafter. The lender will ‘cap’ lender closing costs including legal at $20,000 on loans ranging from $3 million to $50 million. To discuss, please contact David Stepanchak at (818) 883-9611 or Dstep@penstaradvisors.com.

30 Day Libor	10-Year Treasury	Prime
3.96%	3.62%	7.25%