Transaction Overview
Ameet Chagan placed the $4,060,000 acquisition loan for a 34,101 sf. retail center anchored by a Goodwill Center in the Inland Empire. The purchase was sized to 70% of cost and is fixed for five years at 4.75% before rolling for the final two years of the seven year term. Amortized over 25 years, the recourse loan offers a step-down prepayment option.
Challenge: The Purchase and Sale Agreement did not contain a financing contingency; deposits went non-refundable after a 30 day diligence period. The seller was not aggressively marketing the vacant space that negatively impacted the underwritten cash flow. One tenant representing 11% of the net-rentable is currently paying above market rent with a lease renewal date 60 days after the scheduled closing. The appraisal did not support the contracted sale price and the seller was unwilling to negotiate.
Solution: GSP worked closely with seller and buyer’s broker to assimilate all due diligence requests and engaged an appraiser with a two week turn. GSP demonstrated that the major tenant with the lease exposure was a captive tenant with municipal credit and tied to the adjacent court house. This tenant has been in occupancy since 2001. GSP detailed incorrect assumptions in the appraisal and though the value was not significantly impacted, the market information added comfort to the lenders’ decision to advance to 70% of purchase price.
