Transaction Overview
George Smith Partners placed the cash-out refinance of a carwash anchored auto service center in a secondary Los Angeles market. A portion of the loan proceeds for the return on equity will be targeted for future car wash acquisitions. Over half of the Subject’s gross income is generated by a car wash lease from a related party of the Borrower. Although the Operator and Borrower are related, this was not structured as an owner-user execution. Other significant tenants include an auto parts retailer, an insurance broker and a tire retailer/installer. No Phase II investigation was required. Fixed for 5 years at 4.65%, the 10-year term will readjust to the 5-year CMT plus 280 basis points, amortized over 25 years. Sized to 60% of as-is value, proceeds were limited to a 1.35 DCR. Prepayment penalty steps down from 3% and is open years 5 and 10.
Problems: The MAI appraisal came in above projections. Upward movement on the five-year CMT hampered loan proceeds due to the DCR constraint.
Solutions: Due to the favorable appraisal we requested additional loan proceeds and the Bank offered $150,000 more than was applied for. When those proceeds were threatened by the run-up in the CMT, the Bank agreed to reduce their rate by 20 basis points. The Sponsor received more loan dollars at a lower rate than applied for in a rising rate environment.
