Commercial Mortgage Lenders: Redevelopment loan

Commercial Mortgage Lenders:  Northern California Redevelopment

Commercial mortgage lenders with the assistance of commercial mortgage broker Financial Compound perform a high-leverage refinance a 125,000 square foot retail center as part of the property’s redevelopment into a “Fashion Anchored Value Oriented” shopping center.   This 1980’s built, multi-tenant center had been anchored by an 90,000 s.f. hard good retailer with an additional 20 side shops spaces ranging from 900 s.f. to 5,000 s.f., along with a free-standing pad building. In addition, a 60,000 sf grocery store shadow anchors the center. The property was 100% occupied for many years prior tothe hard goods retailer’s bankruptcy filing. At that time, this anchor went dark and stopped paying rent, leaving the center 25% occupied. The borrower commenced a re-tenanting effort and achieved 60% lease up of the center prior to loan application signing with the commercial mortgage lenders, and also achieved 75% leasing prior to loan closing.  The borrower is subdividing the former anchor space with four new discount retailers. Loan proceeds were 97% of all costs including: (1) Payoff of existing loan; (2) Re-leasing and renovation costs; (3) Interest Reserves; (4) All closing costs and fees.

Commercial mortgage broker Financial Compound was able to structure the loan around a few challenging transaction characteristics:  (1) the existing financial structure has the borrower as ground lessee with the ground lessor holding the first mortgage on the improvements. However, a clause in the ground lease states that upon loan payoff, the ground lease could not be encumbered again in the future.  Financial Compound was helpful to the borrower in demonstrating to the existing ground lessor that unless they allow the ground lessee to finance the improvements, this center would be un-financeable;  (2) A couple of the new discount retailer anchor leases have co-tenancy and cancellation clauses based on gross sales. Financial Compound also demonstrated strengthening of the local trade area despite decline in the submarket; due to the property being located in a prime location a block from a major Freeway.

Loan terms included a floating interest rate starting at 7%, two year loan term interest-only, 75% LTV, two 6 month extension options, no prepayment penalty, 2% lender fee.