Transaction Overview
George Smith Partners arranged the $5,700,000 fixed rate financing for a four-tenant retail center with civic parking garage. The 1960s vintage center was a 16,500 square foot single tenant grocer at acquisition in 2002, supported by an “at grade” parking lot. The Sponsor later entered into a development agreement with the City to build a 187 space, three-story parking structure with three street facing units adding 7,500 square feet of additional net-rentable retail to the collateral. At garage CofO, the City entered into a 34 year lease (approximately 24 years remaining today) with a “reversion” structure where the City will take title of the garage and all of the expanded retail space at the end of the lease term. Upon reversion, the Sponsor will lease the retail spaces from the City for $1 per year for 99 years. All of the retail tenants are granted parking rights in the garage in perpetuity. The three in-line spaces have been 100% occupied for most of the 10 years since construction. In mid-2013, the Sponsor executed a new 10 year lease with a privately held national discount store chain that initiated operations in September but did not start rent commencement until late December. The loan was rate-locked and funded prior to rent commencement. A 20 year fixed rate, self-liquidating loan was essential as the balloon risk would be problematic given the termination of the garage income stream and reduction of collateral through the reversion.
