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

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

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.

Advisors

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