Real Estate Loans for Small Business Owner-Users

$6,300,000 Bridge Loan (98% of all-in costs) for a 212,958 sf Kmart Anchored Shopping Center in Steubenville, Ohio:This center was originally anchored by 3 “big-box” tenants, all of which went bankrupt. Two tenants underwent Chapter 7 liquidations (Sun TV and Pharmore) in 1997 and 2002 respectively, and the current anchor (Kmart) emerged from Ch. 11 bankruptcy in 2003 while remaining open for business throughout the bankruptcy. All three of the chains enjoyed their highest regional sales at this center, but the center was left at 45% occupancy when the two anchors went dark. The borrower commenced re-leasing in 2002, which was modestly hindered by the opening of a Walmart superstore across the street. Nonetheless, the borrower has leased up to 73% occupancy and has LOI’s for the balance of the space. Other Challenges: (1) Secondary market location; (2) Lenders wanted strong Kmart sales, but this Kmart experienced a decline in sales in lease year end May 2003 due to inventory problems during Kmart’s bankruptcy and from Walmart competition. Solutions: GSP was able to structure a non-recourse loan by emphasizing the positive feature, including: (1) Prime location near Interstate 22 and Highway 43 with excellent visibility of each tenant from the frontage road; (2) Documented demand for the vacant spaces with LOI’s. Terms: (1) Rate: 9.15%; (2) Term/Amort: 3 years/Interest Only; (3) DCR: 1.15; (4) LTC: 98%; (5) Extension Options: 2 additional 12 month terms upon payment of 0.05% of loan outstanding amount per extension option; (6) Non-recourse; (7) Lender Fee: 2%, (8) Additional funding of $1 million to be used for TI/LC costs associated with leasing up current vacant space for a maximum loan amount of $7.3 million; (9) Prepay: 2% in year 1, open thereafter. (Michael Schwartz)

$2,055,000 Acquisition Financing for 18,300 s.f. Mixed Use Center in Trabuco Canyon, CA:The 2-story property consist of a 3,965 s.f. standalone U.S. Post Office and 14,383 s.f. of medical offices and retail spaces. The 10 tenant center was built in 1985 and has been stably occupied. GSP arranged the loan with a portfolio lender as the borrower didn’t want hefty prepayment penalties or reserve requirements. Challenges: (1) Short closing escrow; (2) The center is in a rural area and the only property entitled for retail use in Trabuco Canyon; (3) The closest retail submarket has a vacancy rate of 15%; (4) 3 of the tenants are on a month-to-month lease. Terms: (1) Rate: 5.875% for the first 5 years, then 5 years floating at Prime + 0.5%, lifetime rate cap of 10.75% and a floor of 5.875%; (2) Term/Amort: 10/30; (3) LTV: 65%; (4) Prepay provision: 3,2,1,0; (5) Lender Fee: 0.50%; (6) Loan closing costs: $4,000. (Michael Schwartz)