$30,000,000 Non-Recourse Cash-Out Refinance of 156,000 SF Retail Center in Los Angeles

Term: 10 Years
Rate: 10 Year Swap + 2.53% (4.91%)
Amortization: 5 years IO followed by 30 year amortization
Prepayment Penalty: Defeasance
LTV: 65%
Debt Yield: 7.75%
DCR: 1.23
Origination Fees: Par
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $30,000,000 in proceeds for the non-recourse cash out refinance of a 156,000 square foot retail shopping center located in Los Angeles. The loan is fixed at a rate of 4.91% for a period of 10 years and offers 5 years of interest only payments. A number of challenges were encountered while marketing the deal. The property is anchored by a major grocery chain, but the lease rolls in 5 years. Several other tenants also roll within 5 years. Additionally, the property location is in a secondary area of greater Los Angeles. However, the borrowers had successfully kept the property at or near 100% occupied for the last several years due to the prominent visibility of the center along a high-traffic street. Finally, sales data was only available for the grocer and one of the separate pads. The owners did not have sales data for the other 20 tenants. GSP sourced a CMBS lender that was not only comfortable with each of these risks, but underwrote the transaction aggressively. The selected lender gave credit for rent increases coming within the next year and used a 3% vacancy rate, resulting in higher underwritten income. The lender was able to size the deal to a 7.75% debt yield, whereas most CMBS lenders would need a minimum 8% debt yield. This resulted in the selected lender providing proceeds of nearly $1,000,000 more than any other lender. Since the buyer had invested considerable amounts in capital expenditures and completed major upgrades in the past three years, the lender was able to underwrite to lower replacement reserves as well as lower tenant improvement and leasing commissions. The loan closed in about 40 days from the time it went into application.

 

 

Advisors

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