Retail

Gary E. Mozer, Katie H. Rodd, Michael Anderson and Kyle Howerton successfully placed $11,700,000 in first mortgage bridge debt on a 1980’s vintage, 88% occupied grocery anchored community shopping center in a Texas college town. The 46,000 square foot grocery anchor has been in occupancy at the property since 1981. The anchor is currently on a one year option with an additional one year option and subsequent five year option to follow, all at below market fixed rents. The short lease terms were negotiated to accommodate a planned expansion by the grocer, however the grocer made a corporate decision not to expand shortly before Borrower’s existing debt was maturing. Borrower requested high leverage financing with the ability to make future capital draws in order to a) pay down maturing debt and b) fund renovations if the grocery anchor vacates. The non-recourse loan was sized to 80% of “As-Is” value, priced at L+5.65%. Challenge: The grocer lease structure makes the deal a “tweener”. Because of the fixed extension options at low rents the grocer could elect to remain at the property, which rendered the transaction ineligible for most bridge/transitional lenders. Permanent financing was not attainable given the short term remaining on the grocer lease coupled with their recent decision not to expand. Solution: GSP identified a capital source that provided a bridge financing structure with future fundings modified depending on the grocer’s renewal decisions. 80% of the As-Is property value was funded at loan closing, with an additional funding of up to $2,250,000 allocated to fund 100% of potential retenanting/renovation costs. Although the additional capital is underwritten and committed, interest is not paid on the future funding until disbursed and there is no “forced funding” date.