Transaction Overview
GSP successfully placed a $6,250,000 on-book loan with a money center bank for the refinance of a 91,000 square foot, 1970’s vintage retail center in Northern California. The “all-in” rate of 2.40% floats monthly over LIBOR and is interest only for the two year term on the 65% LTV no-cash-out refinance. The loan will start to amortize should the borrower execute their option to extend. Personal recourse is limited to the top 40% of the loan. Locked for 12 months, the loan opens to prepayment without penalty after the 1st year.
Challenge: The property was 55% occupied at closing, with an additional 29% of space to-be-built out and occupied by a regional fitness chain paying no rent until early 2015 to offset construction costs funded by the tenant. Submarket retail vacancy is high at over 18%.
Solution: GSP lender relationships and a strong Sponsor allowed us to structure a loan that gave credit to the income attributable to the unopened gym at closing despite almost a year between loan closing and rent commencement. The loan also funded 100% of the buildout and leasing commission costs associated with the future gym, as well as 100% of additional capital expenditures tied to the remodel of an existing pad immediately after closing. This loan structure permitted Sponsor to execute its business plan without contributing additional equity to the transaction.
