Transaction Overview
GSP successfully placed a $12,100,000 on-book non-recourse loan on a 93,593 square foot grocery-anchored shopping center in West Los Angeles. The stable asset was built in the 1950’s and both anchor leases will expire during the loan term. The floating rate loan was priced at LIBOR + 300 but SWAPped at closing, fixing the coupon for five years at 4.73%. Despite the fixed rate SWAP, the loan allows for a step-down pre-payment after the second year.
Challenge: The Sponsor required maximum proceeds structured as a non-recourse fixed rate loan. CMBS execution was not an option due to servicing restrictions and the lack of flexibility to pre-pay the loan and/or redevelop the property in the future. Life companies were unable to reach the required proceeds due to the asset age and expiring anchor leases. Moderate leveraged, non-recourse flexible pre-payable fixed rate capital providers willing to lend on assets facing potential reposition are not widely available.
Solution: GSP optimized execution by achieving non-recourse proceeds comparable to CMBS, competitive pricing, and the flexible prepayment structure of a portfolio lender to allow for future redevelopment. To minimize interest rate risk Sponsor executed a five year Swap with a 4.73% total coupon at closing.
