Economic Stimulus Package, Fed Rate Reduction and International Economic Discord

Due to the confluence of the housing and subprime mortgage debacle, in a press conference last Friday, President Bush announced an economic stimulus package to place capital back into the hands of consumers in an effort to ignite spending as well as to provide consumers the means necessary to afford rising fuel and heating costs. The package will also include tax incentives for businesses and provide additional capital for expansion. As a follow-on to the White House package, the Fed met in an emergency session on Monday and decreased the discount rate 75 basis points. Many economists believe that the 10-year treasury, presently at 3.71%, may drop as low as 2.50% by year end.

Although U.S. Financial Markets were closed in observance of the Martin Luther King Holiday, several European stock exchanges suffered an average 5.50% loss in value for the day. Most Asian exchanges also witnessed significant decreases in value during Monday’s trading activity.

CMBS lenders who seven days ago were quoting transactions at 250 basis points over treasuries, yesterday saw their swaps widen, causing spreads to spike to 370 basis points over their indexes. Portfolio lenders, such as banks, insurance companies, and credit unions continue to lend nationwide and absorb a portion of the product from exiting Wall Street lenders. A number of CMBS lenders are still offering multi-family and commercial loans with interest-only incentives on a limited basis. We will keep you posted…

Penstar recently received an acquisition loan application on the portfolio of eight anchored retail centers nationwide. The lender will provide an 80% of cost loan, fixed at 5.40%, 3 years interest-only and a flexible prepay. The lender will also offer the borrower release provisions at 115% of the allocated loan amount. The loan will be extended to the borrower on a non-recourse basis except for standard carve-outs. To discuss, please contact Rob Stewart (818) 883-9631 or RStewart@PenstarAdvisors.com.

Hot Money
Master Lease Program

Penstar is working with a national real estate investment firm who has developed a facility they call the “Master Lease Program.” This program targets owners and developers currently experiencing occupancy issues, or who have an interest in estate planning. The group will execute a master lease ranging from 55 to 90 years on retail, office, and industrial properties. Our client will provide the owner protection against a potential decrease in property value, continued benefit from future depreciation, create potential tax and estate planning benefits and dependable cash flow, regardless of assts’ current economic position. The investment group will invest money in the form of tenant improvements, leasing commissions, and capital improvements. The program allows the owner to collect a stable rent, avoid leasing risks and mitigate some of the costs associated with commercial property ownership. Properties considered are 40,000 square feet and up with a primary focus in the Southern California region and surrounding Western States. Assets with negative cash flows or requiring significant capital expenditures will be considered. The fund will net lease a partial or totally vacant building. To discuss, please contact Steven Hamermesh at (818) 883-9609 or Hamer@PenstarAdvisors.com.

30 Day Libor	10-Year Treasury	Prime
3.28%	3.71%	6.5%