Non-Recourse Cash Out Refinance of Retail Strip Center in Los Angeles

Rate: Fixed for 10 years at 4.85%, followed by floating at 6 month LIBOR plus 2.5%
Term: 30 years
Amortization: 30 years
Prepayment Penalty: 3,3,2,2,1,1,1
LTV: 65% maximum
DCR: 1.35x
Origination Fees: Par
Guaranty: Non-Recourse

George Smith Partners secured a non-recourse cash out refinance loan for a 12,695 SF retail strip center located in Los Angeles. The loan is fixed at a rate of 4.85% for 10 years and is sized to 65% LTV. The majority of the lenders that were surveyed used a 25 year amortization, but the selected lender was able to use a 30 year amortization. This resulted in a lower monthly payment and greater loan proceeds. The property has one vacancy comprising 11% of the space, which resulted in several lenders limiting their proceeds to the in-place loan amount. GSP pointed out that the space has only been vacant for a few months, and provided historical data showing that the center has consistent high occupancy and long-term tenants. As a result, the selected lender was comfortable providing a non-recourse, cash out refinance loan.


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    $11,650,000 (72% Loan-to-Value) Non-Recourse, Cash-Out Refinance of a Grocery Shadow-Anchored Salt Lake City Retail Center

    January 15, 2019

    Transaction Description:

    GSP successfully sourced $11,650,000 of non-recourse, cash-out, permanent first mortgage debt sized to 72% loan-to-value to refinance out a maturing bridge loan on a 62,500 square foot, grocery shadow-anchored Salt Lake City multi-tenant retail property. The borrower recently completed its re-tenanting business plan that upgraded the tenant base and stabilized the 1960s vintage retail property at nearly 100% occupancy. Although many lenders are increasingly becoming more conservative regarding leverage and interest only terms on retail properties, GSP sourced a lender that relied on the borrower’s substantial real estate experience, strong submarket performance, and a diverse tenant mix to provide a full-leverage, non-recourse loan that repatriated substantial equity to the borrower and included three years of interest only payments followed by 30-year amortization.

    Rate: 5.15%, Fixed
    Term: 10 years
    Amortization: Three years interest only; 30-year amortization thereafter
    LTV: 72%
    Prepayment: Defeasance
    Guarantee: Non-recourse
    Lender Fee: None

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    $124,250,000 Non-Recourse Cash-Out Refinance of a Transitional Property in a Secondary Market

    August 29, 2018

    George Smith Partners secured a $124,250,000 permanent loan to refinance out an existing construction loan on a 560,000 square foot, class-A, mixed-use office and retail property in a Midwest market. The non-recourse loan provided the borrower significant cash out at close in addition to funding 100% of future tenant improvement and leasing commission costs associated with stabilizing the property. It also repaid the existing construction loan and covered closing costs. The existing property is 93% leased, but only 80% occupied, to a mix of credit and non-credit tenants including a boutique cinema. The five-year, floating-rate loan priced at 2.35% over One-Month LIBOR and offered four years of interest only payments with 35-year amortization during the fifth year of the loan term. Other benefits of this loan structure include:
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    • five-year initial term vs. typical 3+1+1 loan term structures that would have required specific performance hurdles and extension fees
    • no forced funding date for the future funding component
    • no syndication risk as the portfolio lender (a bank) is holding the entire loan on balance sheet
    • generous interest rate hedging requirement of purchasing LIBOR caps for two-year terms to reduce hedging costs

    Rate: One-Month LIBOR + 2.35%
    Term: Five Years
    Amortization: Four Years I/O; 35-Year Amortization Thereafter
    LTV: 68.5%
    Guarantee: Non-Recourse
    Lender Fee: 1.00%
    Prepayment: 18-Months Spread Maintenance

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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.

    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.

    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

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    $11,800,000 Non-Recourse Cash-Out Refinance of a Multi-Tenant Retail Center

    January 10, 2018

    George Smith Partners successfully arranged the $11,800,000 non-recourse cash-out refinance secured by a 49,942 square foot multi-tenant retail center in Tarzana, California. GSP identified a capital provider who was comfortable with the return of equity given the Sponsor’s team and experience. Sized to 55% of appraised value, 8.75% Debt Yield, and a 1.65x Proforma DSCR. The 10-year interest only note is fixed at 2.25% over the LIBOR 10 Year SWAP rate (4.62% at closing).

    Rate: SWAP + 2.25% (4.62% at closing)
    Term: 10 Years
    Amortization: Interest Only
    LTV: 55%
    Guarantee: Non-Recourse

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    $4,520,000 Non-Recourse Shopping Center Refinance in Birmingham, Alabama

    December 20, 2017

    George Smith Partners secured $4,520,000 funding to refinance a 110,000 sf multi-tenant retail shopping center located in a tertiary market, Center Point, Alabama. The center did not have any credit tenants; the largest tenants were Dollar Tree, Family Dollar and a regional furniture store. GSP was able to show lenders that these tenants were appropriate for the surrounding demographics. The 2.45% fixed coupon loan is sized to 9.0% debt yield and the 10-year term is fixed with a 30-year amortization schedule thereafter.

    Term: 10 Year Fixed
    Rate: 10 Year Treasury + 230
    Amortization: 30 Years
    LTV: 70%
    Guarantee: Non-Recourse

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