Transaction Description: George Smith Partners secured a $4,100,000 permanent cash-out refinance for the 7,105 square foot mixed use property in a tertiary Northern California market. The property contains four ground-floor retail spaces and two upper-floor apartment units. Fixed for five years at 4.46%, the 10-year term loan then floats at 6 month LIBOR + 2.75%. This non-recourse execution is amortized over a 30-year schedule.
Challenges: GSP encountered several challenges when discussing the transaction with capital providers. The Borrowers requested a 5 year fixed rate loan, but 50% of the retail leases roll within the next two years. Due to the commercial use of the space, most lenders required a 25-year amortization schedule, impacting the cash flow after debt service. The majority of regional portfolio capital providers sought a repayment guarantee to maximize proceeds and/or address the rollover risk.
Solutions: A small TI/LC reserve was set aside to overcome the near-term lease roll. GSP negotiated a DCR constraint of 1.20, lower than the 1.25 requirement traditionally available in the debt market for commercial and mixed use assets. While under application, the lender agreed to increase proceeds due to underwritten NOI documented above original projections.
Advisors
