Retail

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    $7,200,000 Interest Only Refinance for a Retail Center; Fixed at 3.65% for 10 Years; Vista, CA

    November 13, 2019

    Transaction Description:

    George Smith Partners secured $7,200,000 to refinance a 15-tenant retail center in Vista, CA. The Property, which was purchased by the Sponsor in 2016, was 30% occupied at acquisition. The Sponsor spent the last 3 years repositioning the center and leasing the vacant space to a diverse tenant mix of local businesses. The center is now 100% occupied and is anchored by a local grocer and a national bank. With the original business plan completed, there was a question of whether to sell or hold the asset.

    GSP arranged 10-years of permanent financing that allowed the Sponsor to return a sizable portion of the initial equity investment back to investors. The loan is also interest-only for the entirety of the term, maximizing ongoing cash flow. Sized to 62.5% LTV, the non-recourse financing carries a fixed interest rate of 3.65%. The multiple benefits that the loan provides allowed the Sponsor to forgo the option of a sale.

    Rate: 3.65%, Fixed
    Term: 10 Years
    Amortization: Full Term Interest-Only
    Loan to Value: 62.5%
    Prepayment: Defeasance
    Lender Fee: None
    Guaranty: Non-Recourse

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    $9,050,000 Non-Recourse Cash-Out Refinance for Two Retail Centers; Columbus, OH

    November 6, 2019

    Transaction Description:
    George Smith Partners secured $9,050,000 for the non-recourse, cash-out refinance of two unanchored, multi-tenant retail centers in Columbus, Ohio. The two properties were cross-collateralized allowing the Borrower to benefit from securing a higher leverage loan. The permanent loan is fixed at 4.25% for ten years with 12 months of interest only and a defeasance prepayment penalty structure.

    Challenges:
    One of the retail centers had a tenant whose parent company was in bankruptcy proceedings and vacated their space during our loan process. The other retail center, which is newly developed, was in the process of lease up and had a few tenants not yet in occupancy prior to loan closing. The market had very few comparables to support our underwritten value of the Subject Property.

    Solution:
    GSP identified a capital source that understood the strength of the asset, location and the experience of the Sponsor. Based on these strengths and additional market support provided, the Lender was able to offer a cross-collateralized structure, which maximized proceeds at 73% LTV with 12 months of interest only payments. The Capital Provider was also able to fund the loan with a few tenants not in occupancy. This allowed the Sponsor to take advantage of today’s low interest rate environment and eliminate interest rate risk.

    Rate: 4.25% Fixed for 10 years
    Term: 10 years
    Amortization: 30 years
    Prepayment Penalty: Defeasance
    DCR: 1.30x
    Interest Only: 12-months
    Guarantee: Non-Recourse
    Origination Fees: Par

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    $13,155,000 Non-Recourse Cash-Out Refinancing of a Retail Shopping Center; Orange County, CA

    October 23, 2019

    Transaction Description:
    George Smith Partners successfully arranged $13,155,000 in non-recourse bridge financing for a 20,000 sf shopping center in Orange County, CA. The Sponsor has invested over $10,000,000 in renovating the Property and it now it is currently 91% occupied.

    Challenge:
    The Subject Shopping Center has undergone significant reposition in tenant makeup and revenue. As of the date of funding the Center was 91% leased, but several of the tenants were in the process of building out their TIs and had not moved into the Property. Banks, insurance companies, CMBS lenders and credit unions requested more seasoning from our Sponsor. Debt funds and hard money lenders did not want to provide enough proceeds. The financing was too early for a perm lender who would want to see the seasoned cash-flow, and too late for most bridge lenders who would want to fund the actual construction and renovation without releasing cash out to the Sponsor.

    Solution:
    The Sponsor had many goals which included the reposition of the center, the sale of the center, and financing that allowed the Sponsor to pull cash out to sustain him during the sale process allowing him to receive back some of the value added to the Property. GSP was able to provide a solution for the Sponsor with a Midwest-based debt fund that allowed cash out for working capital of over $3,000,000 in less than 15 days. With GSP’s help, the Lender understood the ultimate value of the Property, was able to get comfortable with the large cash-out and give the Sponsor what they needed to complete the final stages of their plan and sell the Property.

    Rate: 8.9% fixed
    Term: 2 Years
    Amortization: Interest Only
    LTV: 80% / LTC: 90%
    Prepayment: None – 6 month minimum
    Guaranty: Non-Recourse

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    Low Debt Yield, 3.77% Coupon Permanent Financing for the Acquisition of a Recently Developed Grocery-Anchored Retail Center; FL

    September 25, 2019

    George Smith Partners successfully placed $14,690,000 in non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 54,000 square foot, 96% occupied, recently developed retail center in Western Florida. An investment-grade grocery anchor on a newly signed long-term lease comprises approximately 75% of the collateral. The anchor has no sales history at the Property and is not required to report sales going forward. GSP sourced a lender to provide full term non-recourse Interest-Only financing subject to a low 7.35% debt yield. The 65% leverage loan has a 3.77% fixed coupon over the ten-year term.

    Rate: 3.77%, Fixed
    Term: 10 years
    Amortization: Full Term Interest-Only
    Loan to Value: 65%
    Prepayment: Defeasance
    Lender Fee: None

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    75% Leverage, 3.75% Coupon Non-Recourse Permanent Financing for a Neighborhood Retail Center; Western United States

    September 18, 2019

    Transaction Description:

    George Smith Partners successfully placed a $5,740,000 non-recourse, ten-year fixed rate loan on an 89% leased, multi-tenant retail property, shadow-anchored by Savers and Big Lots. GSP worked with the Sponsor to overcome several environmental issues with the Property. GSP sourced a lender able to achieve 75% leverage, non-recourse financing and structure around the environmental issues. The loan was sized to the greater of an 9.75% debt yield or 1.40x debt service coverage ratio on the 3.75% fixed rate coupon.

    Rate: 3.75%, Fixed
    Term: 10 years
    Amortization: 30 Year Amortization
    Loan to Value: 75%
    Prepayment: Defeasance
    Lender Fee: None

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    $10,200,000 Cash-Out Refinance of a Historic All-Brick Building; Los Angeles, CA

    August 21, 2019

    Transaction Description:

    George Smith Partners secured a $10,200,000 cash-out refinance of a 1920s-mixed-use brick building located in Los Angeles. In a growing movement to gentrify the area, this Property features both ground floor retail, and multifamily living. The cash-out refinance allowed our Sponsor to recapture the investment they made in upgrading and repositioning the Property. It is challenging for lenders to finance historic brick buildings and they have trouble getting their arms around mixed-use properties because of the potential risk they pose. GSP offered comfort to the Capital Provider by showing the significant improvements the Sponsor made to the Property, quantifying how retail will enhance the Property value as well as the benefits of being fully leased.

    Rate: 4.05% fixed for five years
    Term: 30 years
    Amortization: Interest only
    LTV: 75%
    Prepayment: 1.75% 1-3 years, 1.00% 3-5 years
    Guaranty: Non-Recourse
    Lender Fee: 1%

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    75% Loan-to-Value Non-Recourse Financing for a Newly Redeveloped Two-Tenant Retail Property; Utah

    August 14, 2019

    Transaction Description:

    George Smith Partners successfully placed $6,750,000 of non-recourse, ten-year fixed-rate first mortgage debt collateralized by a 3.36-acre parcel partially encumbered by a ground lease and improved with a 43,500 square foot retail box formerly occupied by a grocery store. The improvements are newly demised into two spaces 100% leased to a national crafts retailer and regional clothing store, and the collateral also includes two small pads ground leased to a local coffee shop and ice cream parlor. GSP sourced a lender comfortable with providing a 75% leverage permanent loan despite the absence of tenant sales history. Additionally, the Sponsor executed the ice cream parlor ground lease during financing diligence, and GSP worked with the Lender to increase loan proceeds (subject to a lender holdback until tenant opens for business) commensurate with the income attributable to this new lease even though the tenant had not yet built its premises at the time of loan closing.

    Rate: 4.60% Fixed; coupon reflects 10-year Swap index as of December 2018
    Term: 10 Years
    Amortization: 30 Years
    Loan to Value: 75%
    Prepayment: Yield Maintenance
    Lender Fee: None

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    $19,900,000 Acquisition Financing for Burbank Collection Retail Condominium

    August 7, 2019

    Transaction Description:

    George Smith Partners arranged a $19,900,000 CMBS acquisition loan for the purchase of the Burbank Collection, a 39,000SF retail condominium located in Burbank, CA. The Burbank Collection houses well-known food concepts such as Yard House, Panera Bread, Pinkberry, and Boiling Crab along with Barney’s Beanery and Steak ‘N Shake. The Class-A ground floor retail space underlies 118 residential condominium units, is situated on a pedestrian promenade and is shadow-anchored by the AMC Burbank 16 movie theater, one of the highest grossing AMC theaters in the country.

    GSP’s extensive lender relationships allowed for the marketing of this financing to many different banks and life insurance companies as well as CMBS lenders. The most challenging hurdle at the outset with each lender was to make them comfortable with the condominium structure. Prior to the signing of the lender’s loan application, GSP requested that the Lender’s legal counsel engage in a full review of condominium documents to ensure that the Lender would be comfortable with the intricacies of condominium ownership.

    After the loan was in application the 10-Year Treasury and Swap indices dropped approximately 40 bps below the rate floor set in the loan application. GSP’s long-term relationship and track record with the Lender gave GSP the negotiating leverage to convince themto drop the rate floor. This effectively split the benefit of the rate decrease with our Sponsor.

    GSP obtained maximum proceeds as the loan was sized to 76.5% of purchase price and 75% of value. The all-in interest rate was priced at 157 bps over 10 Yr Swaps and includes three years of interest-only payments.

    Rate: 3.85%
    LTPP (Loan-to-Purchase Price): 76.5%
    Term: 10 Years
    Amortization: 30 Years
    Interest-Only: 3 Years
    Guaranty: Non-Recourse
    Lender Fee: Par
    Open Prepayment: Last 6 Months

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    $55,000,000 of Permanent Financing for 218,000 SF, Grocery-Anchored Center; Ventura, CA

    July 31, 2019

    Overview:

    George Smith Partners arranged $55,000,000 of long-term debt for a grocery-anchored mixed-use center located in Ventura, CA. The 218,000 square foot property is currently 97.5% occupied and is anchored by Ralphs, CVS, and LA Fitness. Proceeds were used to refinance the existing debt which was comprised of both senior and mezzanine debt and gave the Sponsor ample reserves for capital expenditures and future leasing costs. The non-recourse financing was sized to 65% of value and has a fixed rate of 3.87% for the life of the loan. GSP was also able to negotiate interest only for the entirety of the 10-year term.

    Challenges:

    While a majority of the center is retail, the collateral also includes second-floor office space. There were concerns about the leasability of the office suites and depth of the market in regard to future tenants. A portion of the Property is subject to a ground lease with a utility company. The ground lease expires in 13 years, 2032. It encompasses part of the parking lot which had the potential to affect our parking ratio in the event the Sponsor forfeited the collateral. In addition, our full-term interest only was subject to a 65% loan-to-value stipulation.

    Solutions:

    Apprehension over the desirability of the office space was mitigated by showing that the average tenancy of the current office users at the center is over 10 years. This helped to convince the Lender that there was little chance of multiple tenants vacating in succession. While the ground lease expires in 2032, GSP highlighted the fact that the ground lessor is a utility company that should be amenable to future extensions. In discussing with zoning experts, the parking ratio without that portion of the center was determined to be sufficient. By leaning on the Sponsor’s long history with the asset and best-in-class property management, GSP was able to support a value that came in under the 65% LTV threshold, which maintained the interest only component of the financing for the full 10-year term.

    Rate: 3.87% Fixed for Entire Term
    Term: 10 Years
    Amortization: Full-Term Interest Only
    LTV: 65%
    Guarantee: Non-Recourse
    Lender Fee: Par
    Prepayment: Defeasance

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    GSP Increases Financing to $11,200,000 to Cover Renovation Cost Overruns in Five Days; Orange County, CA

    July 24, 2019

    Transaction Description:

    After securing an initial loan of $9,700,000 for a well-located Orange County, California retail center, George Smith Partners arranged an additional $1,500,000 in construction/renovation mezzanine capital. This brought the total debt capitalization to $11,200,000. The Sponsor has been renovating the center over the last year but went over-budget due to increasing construction costs.

    Challenges:

    The Sponsor had used a debt-fund loan to renovate the aging shopping center and make it more vibrant. However, due to rising construction costs, the Sponsor went over budget with the property renovations. Most lenders are not comfortable financing a project that already has expensive debt and is also experiencing cost overruns.

    Solutions:

    GSP ultimately demonstrated the lender’s last dollar basis was very conservative compared to the as-stabilized value of the property following renovations. GSP utilized one of our relationship lenders to provide the emergency capital and was able to close the transaction within just five days. This allowed the Sponsor to complete construction and focus on leasing the center.

    Rate: 8.4%
    Term: 1 Year and 1 Year extension
    Amortization: Interest only
    LTV: 80% Cost
    Prepayment: None
    Guaranty: Non-Recourse
    Lender Fee: 1%

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    $41,000,000 in Permanent Financing for 187,000 SF, Shopping Center in Lakewood, CA

    July 17, 2019

    Transaction Description:

    George Smith Partners secured $41,000,000 in non-recourse debt to refinance an existing senior and mezzanine loan for a regional Southern California shopping center. The Property is 187,000 square foot center; 100% occupied, with anchor tenants Hobby Lobby and Michaels. GSP worked with the lender to assuage B-Piece buyer concerns of the anchor tenant’s termination risk. Loan proceeds repaid the existing senior and mezzanine loans, covered closing costs, and provided a return of equity to the Sponsor. The financing is a 10 year full term interest only loan that maximizes cash flow for the Sponsor. The non-recourse fixed-rate loan priced at 1.57% over the 10-year Treasury that had a floor of 2.40% at application.

    Rate: 3.97% Fixed for Entire Term
    Term: 10 Years
    Amortization: Full-Term Interest Only
    Loan-to-Value: 65%
    Guarantee: Non-Recourse
    Lender Fee: Par
    Prepayment: Defeasance

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    $3,900,000 Cash-Out Permanent Financing with Full Term Interest-Only After Exchange; Los Angeles, CA

    July 2, 2019

    Transaction Description:

    George Smith Partners financed the purchase of a mixed-use retail/office building in Los Angeles, California, last year, using a 1031 exchange. GSP used our vast experience with tax differed exchanges to arrange a cash-out financing with a seven-year fixed rate and is full term interest-only. The cash- out was used to purchase a new property and the Sponsor was able to reinvest their entire exchange in the purchase to differ any taxable gain. The new refinance allowed the Sponsor to pull cash out from the property tax free and use that cash to grow his real estate portfolio. While the cap rate at purchase was very low, the Property’s value will continue to increase due to its location in a great Los Angeles neighborhood. In a traditional loan, the Borrower would be limited on the loan size and cash flow but structuring the full term interest-only loan allowed the Sponsor to achieve positive cashflow and acquire the new asset without issue.

    Rate: 4.9%
    Term: Fixed for 7 Years
    Amortization: Full Term Interest only
    LTV: 70%
    Prepayment: 4,3,2,1
    Guaranty: Non-Recourse
    Lender Fee: None

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