Transaction Overview
George Smith Partners secured a $2,400,000 recourse loan for the refinancing of a multi-tenant retail center, “The Olivewood Shopping Center” in Murrieta, CA. The Sponsor purchased six parcels totaling four acres in 2010. The construction of five retail buildings was completed in 2013 and the Sponsor sold three buildings prior to the financing. One remaining building is 100% leased to four retail tenants; the other building and adjacent lot have been ground leased to a carwash tenant. There was no debt on the Property and loan proceeds were used to buy out the ownership interest of the other partners.
Challenges:
Over half of the income for the Property was attributed to a carwash ground lease which is a special purpose use that some lenders are uncomfortable financing. While the ground lease was signed at loan closing, the rent would not commence until mid-2020. Also, in place rents did not support the full loan request.
Solution:
A portion of the loan was funded at closing and sized to in-place rents with a future funding occurring when the carwash takes occupancy and begins paying rent. The Sponsor will not pay interest on the future funded portion of the loan until it is disbursed.
