Transaction Overview
George Smith Partners successfully placed the 100% cash-out refinance of a high-end, single-tenant retail building on the World famous 3rd Street Promenade in Santa Monica. The 7,500 square foot building is home to the first West Coast Converse retail location, housing the largest collection of Converse footwear and apparel. The 15 year loan term exceeds the single tenant lease by six years. Fixed at 4.98%, the 30 year due in 15 year term offers a step-down prepayment option.
Challenge: The single-tenant lease matures in 9 years, creating a substantial event risk 6 years prior to the loan maturity. The loan request sized out to $933 per square foot, virtually impossible to comp-out in Santa Monica outside of the Promenade. The Borrower required a long-term fixed rate with a pre-payment option that excluded yield maintenance or defeasance. This cash-out loan represents a significant return of equity and the property was Free & Clear prior to funding.
Solution: The 3rd Street Promenade has evolved into Southern California’s premier retail and entertainment destination. GSP identified a portfolio lender who recognized that this location offers pedestrian traffic unparalleled anywhere in the State, and was therefore very comfortable in the high loan per foot and the lease event risk. The Capital provider was willing to provide an alternative prepayment schedule given the low LTV.
