Rate: 4.70% Fixed for 10 Years
Term: 10 Years
Amortization: 30 Years
Prepayment: Yield Maintenance
George Smith Partners secured permanent forward commitment financing for a Walmart Neighborhood Market-anchored retail center in Jacksonville, Florida. The 71,000 square foot property was 98% leased at closing. The Walmart Market makes up 57% of the square footage and is on a new 20-year ground lease followed by sixteen, 5-year options. The Tenant built their own store after Sponsor delivered the pad, and opened the store just weeks prior to funding, which the ender required in order to close the loan. GSP sourced a ender that provided a forward commitment. The Lender locked the interest rate in mid-April for a July funding. The Sponsor was able to lock in a rate in advance of a run up in Treasuries. Other tenants include multiple restaurants (both local and chains), hair salon, nail salon, tax service, etc. — a classic “daily needs” retail tenant lineup. The property, which was built in 1990, recently underwent upgrades to the building façade, roofs, and parking lot; it looks like a brand new center. The $8,100,000 loan was sized to 70% of value and has a fixed interest rate of 4.70% for 10 years. It amortizes over a 30-year period, has a yield maintenance prepayment penalty, and is non-recourse.
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Senior Vice President
Assistant Vice President
$7,490,000 in Full Term 10 Year Interest Only Non-Recourse Permanent Financing for a Neighborhood Retail Center in the Southwestern US
June 13, 2018
GSP successfully placed $7,490,000 of non-recourse, ten-year fixed rate first mortgage debt for the recapitalization of an approximately 80,000 square foot, 95% leased multi-tenant retail property anchored by a regional Hispanic grocer.
The sponsor initially acquired the 1980’s vintage property in 2013 and proceeded to undertake a major renovation and increase leasing from 5% to over 90% with the goal of recapitalizing the ownership structure and placing permanent debt on the asset at stabilization. During the permanent loan diligence process one of the tenants vacated due to a corporate mandate, however GSP and the lender worked with the sponsor to maintain loan proceeds and full term Interest Only payments despite the associated loss of income. The lender was able to partially underwrite income derived from a newly signed lease even though there is a substantial delay between lease execution and rent commencement for the new tenant, and held back tenant improvement funds for the new tenant’s buildout at loan closing.
The 66% leverage non-recourse loan was sized to the greater of a 9.0% debt yield or 1.45x debt service coverage ratio on the 4.61% fixed rate coupon. The 10-year term has Interest Only payments for the entire loan term, maximizing sponsor cash flow.
June 13, 2018
George Smith Partners secured an $18,900,000 non-recourse permanent refinance for an 89,000 square foot fitness-anchored retail center in eastern Los Angeles County. When discussing the transaction with lenders, GSP encountered a 42 basis point range between the highest and lowest spreads over the 10-year Swap Rate. Fixed for 10 years at 4.65%, payments are interest only for the entire 10-year term.
A Phase I environmental report revealed the presence of a former gas station, mandating a Phase II subsurface investigation. The subject property has a vacant freestanding pad comprising 16% of the rentable square footage that has been vacant since the end of 2015. A Tenants-In-Common (TIC) ownership structure added complexity to due diligence and closing documentation involving carve-out guarantors. Post application, market spreads widened considerably and threatened proceeds due to a DCR constraint.
A Phase II subsurface investigation confirmed the soils were void of any environmental contaminants. For the vacant pad, GSP verified the location is the last Class A retail space available in this submarket and provided recently generated LOIs from several prospective tenants. This allowed the underwriter to become comfortable with the in-place vacancy without mandating a newly signed lease for this pad. The TIC ownership is comprised of only four entities and the carve-out guarantor holds management control over of all four entities. This simplified due diligence and provided additional clarity for asset control. While in application, our Sponsor was able to renew a major tenant and replace another tenant with a newly signed lease without any downtime. An up-to-date list of tenant LOIs in the vacant pad allowed GSP to demonstrate a consistency of future cash flow and reinforced the strength of the asset. This allowed the lender to maintain the 1.58% spread and the original applied for loan proceeds.
$7,800,000 Cash-Out Permanent Financing for an 88% Occupied Multi-Tenant Shopping Center in Tulare, CA
June 6, 2018
George Smith Partners successfully arranged $7,800,000 in cash-out permanent financing secured by a shopping center anchored by national grocery store and discount retailer, located in Tulare, California. The property consists of 15 tenants with a total rentable area of 82,852 SF.
The subject property is encumbered by a ground lease. Located in a tertiary market, the property is 88% occupied. The tenants are under short-term leases, 90% of which will roll within the first five years of the loan term. GSP identified a capital provider who was comfortable with ground leases and short-term tenant leases by underwriting a reserve for tenant improvements and leasing commissions. The non-recourse loan floats at 10-year Swap + 2.20% for 10 years. Interest only for 5 years, and 30 year amortization thereafter.
Commercial Real Estate $2,925,000 Cash-Out Refinance for a Mixed Use Property in Palm Desert at 87% Loan to Cost
May 30, 2018
George Smith Partners arranged a $2,925,000 cash-out refinance loan for a 20,300 square foot mixed-use office over retail property in Palm Desert, California. The deal presented numerous challenges. First, the sponsor only owned the property for three months. Second, a lease was not available for the anchor restaurant space comprising two thirds of the property’s square footage. Third, the sponsor required extremely high leverage and conventional bank interest rates. Finally, the Sponsor needed to close the refinance transaction in 30 days due to a pending acquisition.
To overcome the challenges George Smith Partners sourced a bank lender with which it had a long history of closing aggressive conventional financing with low interest rates. The property’s attractive location in Palm Desert, between the well-known retail thorofare of El Paseo and Highway 111, was emphasized as well as the Sponsor’s successful track record of purchasing notes on distressed properties, foreclosing on those properties and repositioning them.
Sized to an aggressive 87% of purchase price, the loan included a 6-month interest reserve but did not require a holdback for TIs and LCs. The three year mini permanent loan is interest only for the first 12 months followed by 25 year amortization for the remaining two years. The loan floats at Prime plus 0.5% (5.25% today) with no prepayment penalty, and the lender fee was a minimal 0.5%. The loan closed in exactly 30 calendar days from application, which is an extremely fast closing timeframe for a conventional bank.
Rate: Prime + 0.5%
Term: 3 Years
Amortization: 12 Months Interest Only; 25 Year Amortization Thereafter
LTC / LTV: 87% / 65%
Recourse: Full Recourse
Prepayment Penalty: None
Lender Fee: 0.5%
- Advisors: Zachary Streit
May 23, 2018
George Smith Partners successfully arranged $1,750,000 in cash-out permanent refinance secured by a 107,965 SF, 9-tenant shopping center in Rialto, California. The shopping center is currently 100% occupied, anchored by Superior Grocers, CVS and McDonald’s. The purpose of the cash-out refinance is to pay-off an existing loan, and use the remaining balance for future investment.
The subject property is encumbered by a ground lease with 12 years of the term remaining. GSP identified a capital provider who was comfortable with the ground lease due to the financial strength and track record of the Borrower. GSP facilitated communications between Borrower and Lender to clarify complicated subleases between tenants, and assessed the property’s cash flow risks upfront. The loan is fixed for 10 years at 4.75%, 25 year amortization. No prepayment penalty.
Term: 10 year fixed rate loan
Amortization: 25 years
Loan to Value: 64% (as-is)
DSCR: 1.25X (Based on Actual Income)
Prepayment: No prepayment penalty
Lender Fee: Par
TI/LC Reserves: No upfront TI/LC holdbacks and on-going reserves
Free rate lock at signing of LOI for 5 Months
75% Loan-to-Value Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market
May 16, 2018
GSP successfully placed $9,867,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 100,000 square foot, 1980’s vintage, 97% occupied multi-tenant retail property anchored by a national discount retailer and national drugstore. The anchor leases expire in 2019 and 2020, respectively, and almost 80% of leases at the property roll during the first five years of the loan term. GSP sourced a lender able to achieve 75% leverage non-recourse financing despite the tertiary location, and the loan is structured with an upfront holdback of $275,000 allocated for tenant improvement and leasing commission costs to mitigate near-term tenant rollover.
The 75% leverage non-recourse loan was sized to the greater of an 8.5% debt yield or 1.30x debt service coverage ratio on the 4.91% fixed rate coupon. The 10-year term has one year of Interest Only payments and a 30-year amortization schedule thereafter.