$10,465,000 Non-Recourse Acquisition Permanent Financing on a 100% Leased Non-Credit-Grocer Anchored Shopping Center; 65% LTPP, 10-years I/O, 3.04% Fixed Rate; Pacific Southwest

Transaction Description:

George Smith Partners successfully closed a loan at 60% loan-to-value for an 84% occupied, newly built, and stabilized retail center in Bakersfield, CA. GSP located a lender that was able to lock the rate of 4.125% at application to avoid the rate volatility in the market. Many lenders were not comfortable quoting the deal because of the lack of operating history. GSP was able to locate a lender that was comfortable with the lack of history, with a 6-month debt service reserve held back at closing, to ensure that the tenants continue to pay rent. The reserve is released after 6 months of full rent collection.

Transaction Description:

George Smith Partners successfully placed $42,400,000 in non-recourse bridge debt financing, which funded 80% of total project costs for the acquisition and value-add business plan of an off-market, 26-property retail portfolio spread across 19 midwestern and southern states. Although financing retail value-add business plans during COVID is challenging, the portfolio is comprised of a diversified rent roll including 20% of gross potential rent derived from investment-grade tenants. Furthermore, each asset within the portfolio is shadow anchored by strong performing corporate owned Walmart grocery shopping centers.

GSP leveraged its lender relationships and capital markets expertise to source a lender who understood the business plan and product type, who was willing to invest the time and effort to underwrite a large retail portfolio spread throughout 19 different states, and in markets with average populations below 30,000; during COVID.

Transaction Description:

George Smith Partners successfully placed $30,000,000 in permanent fixed-rate financing for a 230,000 SF infill Southern California retail center amidst the COVID-19 pandemic. As a market-leading retail center near local economic and transit hubs, the Property’s mix of need-based and experiential tenants proved resilient. Capital providers continue to be hesitant in financing retail but were specifically concerned with California’s mandates that impacted the operation of non-essential businesses. As non-essential businesses and experiential tenants comprise a significant portion of tenancy, this posed significant challenges. These included the temporary closure of a movie theatre with less than one year of primary lease term remaining and a fitness center that vacated during the pandemic.

George Smith Partners secured 10 years of permanent financing with full-term interest-only in a financial environment that continues to be cautious towards retail. GSP negotiated competitive pricing at the desired level of proceeds and guided the deal to a successful closing.

Transaction Description:

George Smith Partners secured a $3,500,000 of non-recourse bank loan to refinance a 21,000 SF shopping center shadow-anchored by a Lowe’s (NAP). The 100% occupied center consists of 4 buildings, 7 tenants, and is located in Oxnard. Tenants are a strong mix of national and regional tenants and includes one longtime local business. GSP worked with a lender that structured the loan term to be coterminous with the loan term of the Lowe’s. This allows the sponsor to have maximum optionality at loan maturity. The new financing lowered the interest rate from 5.10% to 3.28%. The fixed-rate loan was rate locked shortly after application, allowing plenty of time to collect SNDAs and Estoppels. The loan allows sponsor to pay down the balance by 5% in any given year without penalty and features a step-down prepayment.

Transaction Description:

George Smith Partners advised on the placement of $51,750,000 and $16,200,000 Senior Debt and Mezzanine debt respectively for the ground-up development of an institutional quality 204,275 SF outdoor shopping center that will be located along Kuakini Highway, one of the island’s most trafficked thoroughfares. The Property, which sits on a rare fee-simple 20-acre site, will provide patrons with easy access to both Henry Street and Palani Road and over 700 parking spaces (representing a parking ratio of 4:1,000 SF).

Challenges:

Although the Sponsors who partnered with a major life company, had extensive prior career experience in the field of commercial real estate development, the Project represented the Sponsor’s largest development to date. The development of the Project had already commenced adding another layer of complexity to the transaction.

Solutions:

GSP focused on the lack of new retail development on Kona and specifically the anchor tenant’s commitment to relocate their store from an adjacent shopping center (less than 0.50 miles). In addition, GSP was able to convey to capital sources the immense value of the fee simple ownership of the site – a rare occurrence in Hawaii where most land is leased from the State. Ultimately GSP was able to identify two lenders who not only understood the value of the fee simple ownership of the site but also understood the lack of new retail space and the subsequent demand.

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.