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
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.
Advisors
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Steve Bram
Managing Director & Principal / GSP Co-Founder
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Allison Higgins
Senior Vice President
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David R. Pascale, Jr.
Senior Vice President
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Nick Rogers
Vice President
Related Financings
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$18,900,000 Fitness Anchored Retail Refinance w/10 Years Interest Only @ 10-year Swap Rate + 1.58%
June 13, 2018
Transaction Description:
George Smith Partners secured an $18,900,000 non-recourse permanent refinance for an 89,000 square foot fitness-anchored retail center in eastern Los Angeles County. When discussing the transaction with lenders, GSP encountered a 42 basis point range between the highest and lowest spreads over the 10-year Swap Rate. Fixed for 10 years at 4.65%, payments are interest only for the entire 10-year term.Challenges:
A Phase I environmental report revealed the presence of a former gas station, mandating a Phase II subsurface investigation. The subject property has a vacant freestanding pad comprising 16% of the rentable square footage that has been vacant since the end of 2015. A Tenants-In-Common (TIC) ownership structure added complexity to due diligence and closing documentation involving carve-out guarantors. Post application, market spreads widened considerably and threatened proceeds due to a DCR constraint.Solutions:
A Phase II subsurface investigation confirmed the soils were void of any environmental contaminants. For the vacant pad, GSP verified the location is the last Class A retail space available in this submarket and provided recently generated LOIs from several prospective tenants. This allowed the underwriter to become comfortable with the in-place vacancy without mandating a newly signed lease for this pad. The TIC ownership is comprised of only four entities and the carve-out guarantor holds management control over of all four entities. This simplified due diligence and provided additional clarity for asset control. While in application, our Sponsor was able to renew a major tenant and replace another tenant with a newly signed lease without any downtime. An up-to-date list of tenant LOIs in the vacant pad allowed GSP to demonstrate a consistency of future cash flow and reinforced the strength of the asset. This allowed the lender to maintain the 1.58% spread and the original applied for loan proceeds.Rate: 4.65% for 10 years (10 year Swap Rate + 1.58%)
Term: 10 years
Amortization: Full Term Interest Only
Prepay: Defeasance
LTV: 62%
DCR: 1.40
Debt Yield: 9.25%
Guarantee: Non-Recourse- Advisors: Matthew Kirisits