Transaction Overview
George Smith Partners successfully placed the refinance of an under-performing retail center in San Mateo. The 30 year amortized loan is priced at 6.15% fixed for five years before adjusting for the 2nd five-year term.
Challenge: Unanchored retail is a challenge for most debt providers. The subject property, while providing a 1.30 debt coverage ratio, was 75% leased and occupied at application after two national tenants cancelled their leases. Transactions under 80% occupancy are traditionally qualified as bridge or transitional loan requests. Several leases were above market at the time of funding.
Solution: GSP identified a local portfolio capital provider who is comfortable financing in-line retail and was willing to look to the in-place tenancy in servicing the debt regardless of the physical occupancy. One of the two vacant spaces was fully furnished as a sandwich shop and required no TIs or fixtures. This space became leased and occupied six days prior to close resulting in an 87% occupied center at funding. A favorable MAI valuation and market rate lease underwriting (below actual collections) added additional cushion to this loan request.
