$8,700,000 Acquisition Bridge Loan for Renovation of Strip Retail Center and New Pad Construction

Rate: 1-Month LIBOR + 410
Term: 36 Months + Two, 12-Month Extensions
Amortization: Interest Only
Loan to Cost: 76% LTC
Lender Fee: 1.0% Origination Fee
Prepayment: 12 Months of Yield Maintenance
Guarantee: Non-Recourse

Transaction Description:
George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.

Challenges:
The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.

Solution:
George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.

Advisors

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