Full Term Interest-Only Non-Recourse Permanent Financing on a Newly Redeveloped Multi-Tenant Retail Property; Utah

Rate: 3.94% Fixed
Term: 10 Years
Amortization: Interest-Only
Loan to Value: 62.5%
Prepayment: Yield Maintenance
Lender Fee: None

Transaction Description:

GSP successfully placed $4,000,000 of non-recourse, ten-year fixed-rate first mortgage debt collateralized by a 48,000 square foot retail box newly demised into four tenant suites. The improvements are 100% leased to two gym users, a restaurant, and an auto parts store. GSP sourced a lender comfortable with providing a full-term Interest-Only loan on the collateral despite both gym tenants, which represent 64% of income and 62% of building square footage in the aggregate, having newly signed leases and therefore no sales history at the Property. Additionally, GSP worked with the Lender to close the loan prior to the smaller gym tenant (11% of income and 14% of building square footage) completing its buildout and opening for business. Loan proceeds were subject to an 8.75% debt yield and the Interest-Only loan has a fixed coupon of 3.94% for the ten-year term.

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Related Financings

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    $18,900,000 Fitness Anchored Retail Refinance w/10 Years Interest Only @ 10-year Swap Rate + 1.58%

    June 13, 2018

    Transaction Description:
    George Smith Partners secured an $18,900,000 non-recourse permanent refinance for an 89,000 square foot fitness-anchored retail center in eastern Los Angeles County. When discussing the transaction with lenders, GSP encountered a 42 basis point range between the highest and lowest spreads over the 10-year Swap Rate. Fixed for 10 years at 4.65%, payments are interest only for the entire 10-year term.

    Challenges:
    A Phase I environmental report revealed the presence of a former gas station, mandating a Phase II subsurface investigation. The subject property has a vacant freestanding pad comprising 16% of the rentable square footage that has been vacant since the end of 2015. A Tenants-In-Common (TIC) ownership structure added complexity to due diligence and closing documentation involving carve-out guarantors. Post application, market spreads widened considerably and threatened proceeds due to a DCR constraint.

    Solutions:
    A Phase II subsurface investigation confirmed the soils were void of any environmental contaminants. For the vacant pad, GSP verified the location is the last Class A retail space available in this submarket and provided recently generated LOIs from several prospective tenants. This allowed the underwriter to become comfortable with the in-place vacancy without mandating a newly signed lease for this pad. The TIC ownership is comprised of only four entities and the carve-out guarantor holds management control over of all four entities. This simplified due diligence and provided additional clarity for asset control. While in application, our Sponsor was able to renew a major tenant and replace another tenant with a newly signed lease without any downtime. An up-to-date list of tenant LOIs in the vacant pad allowed GSP to demonstrate a consistency of future cash flow and reinforced the strength of the asset. This allowed the lender to maintain the 1.58% spread and the original applied for loan proceeds.

    Rate: 4.65% for 10 years (10 year Swap Rate + 1.58%)
    Term: 10 years
    Amortization: Full Term Interest Only
    Prepay: Defeasance
    LTV: 62%
    DCR: 1.40
    Debt Yield: 9.25%
    Guarantee: Non-Recourse

  • Expand

    $11,700,000 Non-Recourse Acquisition Financing on a San Diego County Shopping Center with Near-Term Anchor Roll

    May 10, 2017

    GSP successfully placed $11,700,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of a 75,000 square foot Southern California multi-tenant retail property anchored by a regional Hispanic grocer and national discount retailer.  The 1970’s vintage property is 100% occupied and the two 25,000 square foot anchor tenants who comprise 67% of total collateral square footage.  The national discount retailer pays below market rent and its lease expires in 2018 with no renewal options, providing significant potential upside for equity and cash flow risk for debt.  GSP highlighted strong anchor sales and an experienced sponsor with extensive retail tenant relationships in order to get the lender comfortable sizing to a 7.7% debt yield.  The non-recourse loan has a 4.52% fixed coupon and the 10-year term is interest only for the first five years, with a 30-year amortization schedule thereafter.

    Rate: 4.52%, Fixed
    Term: 10 years
    Amortization: 5 Years Interest Only; 30 Year Amortization thereafter
    Prepayment: Defeasance
    Lender Fee: Par
    Guaranty: Non-Recourse

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