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Newly Constructed Retail Center in South Central LA Trades for $24 Mil

5/05/15

Optimus Properties LLC and Infinity Redevelopment LLC recently acquired Juanita Tate Marketplace, a 77k sf, newly constructed retail shopping center in the South Central neighborhood of Los Angeles, for $24 mil ($312/sf). The property was developed in partnership with the City of Los Angeles and the nonprofit organization Concerned Citizens of South Los Angeles (CCSCLA) to bring retail options and jobs to this dense, low income area of the Los Angeles market.

The property was purchased with $22 mil in acquisition financing arranged by Shahin Yazdi of George Smith Partners (GSP). The 10-year, fixed rate loan has an interest rate of 4.187 percent, with two years interest-only, followed by a 30-year amortization. The loan closed at 90 percent LTC and 76 percent LTV.

Yazdi points out that, when identifying acquisition financing for the property, one factor that made the investment stand out to potential lenders was the property’s valuation, which far exceeded the purchase price. In fact, some appraisers estimated the property value in the $30 mil range.

“In addition to the property’s high appraisals, the asset has strong in-place co-anchor tenants, including CVS and local grocery chain Northgate González Markets,” he said. “These tenants, coupled with the limited supply of nearby retail options made this investment particularly attractive to potential lenders.”

Yazdi notes that a complication did arise as a result of the property’s construction loan, which is a City-funded Section 108 loan. This loan type is provided by Cities for projects that help to revitalize neighborhoods through new low-income housing or job creation.

“One caveat of the Section 108 loan is that the City is named as a second trustee,” Yazdi explained. “Based on this, the City would be able to foreclose on the property if the owner were to default on the new acquisition loan.”

In order to make lenders comfortable with the property’s existing loan, GSP secured a letter of credit to cover the balance of the Section 108 loan until the loan repayment was complete.

Joseph Shabani, a principal of Optimus Properties explained, “We bought an incredible asset that serves a very underserved community in a first class fashion. We have some more minor upgrades and modifications in mind to make the center even more appealing.”





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