$7,490,000 in Full Term 10 Year Interest Only Non-Recourse Permanent Financing for a Neighborhood Retail Center in the Southwestern US

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.

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.

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.

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.