Transaction Overview
GSP successfully placed the $16,000,000 on-book, non-recourse loan for a 152,765 square foot grocery-anchored shopping center. The retail asset is located in Sonoma County, Northern California. The loan was sized to 65% of value, allowing for a return of equity back to the Sponsor. The rate floats during the 7-Year term at LIBOR + 2.50%, currently at 2.70%. There is no prepayment penalty while floating over LIBOR although the Borrower may fix the coupon through a swap at any time during the 7-year term.
Challenge: The property is currently 81% occupied. The non-credit grocery anchor representing 33% of the center has very strong sales but faces a lease expiration in 2016, during the initial loan term. An additional national anchor tenant representing almost 20% of the net rentable is a recently executed lease with no sales history.
Solution: GSP targeted non-recourse on-book lenders who valued the Borrower’s track record of successful operating experience, allowing the Borrower to benefit from earn-out proceeds as the property stabilizes. The loan structure has an initial funding of $13,500,000 based on the property’s cash flow today, and incudes up to an additional $1,000,000 for future leasing costs associated with vacant space. A favorable appraisal resulted in up to $1,500,000 of additional funds made available to the Borrower upon meeting cash flow hurdles upon stabilization. Interest is paid only on the funded amounts and not on earn-out dollars until disbursement.
