Transaction Overview
George Smith Partners secured a 10 year permanent refinance loan for a 17,054 SF retail strip mall shopping center located in a prime neighborhood in Los Angeles. The Property has prominent signage and easy access from a highly trafficked intersection. Several of the tenants have been in place for over 20 years and have a loyal and repeat customer base.
The Borrower sought a low leverage rate and term refinance but required a flexible prepayment penalty in case he decided to redevelop the Property. The Property also has an onsite dry cleaner that does not use a green cleaning process. The presence of the dry cleaner mandated a Phase II report that would require drilling. In addition, the Property has several tenants that operate under short term leases.
Instead of a Phase II report, the selected Lender estimated a Maximum Expected Loss if environmental remediation were required. The MEL was deducted from the appraised value of the Property. Since the loan still met the Lender’s LTV constraint, no further environmental testing was required. The Lender’s concern about short term leases was addressed by demonstrating that the Tenants had been located in the Property for many years. Overall, the Property had very little turnover due to the Owner’s skillful management. As a result, the Lender was comfortable with the consistency of cash flow at the Property.
