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6/21/12
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Highland Realty Capital recently arranged $18.1 mil in refi money on a 128k sf grocery/drug-anchored shopping center in Los Angeles. The 10-year fixed-rate, permanent loan was funded by a life insurance company.
Highland reports that there were some challenges involved in getting the loan funded, including the fact that the grocery store lease expires in 2019, and same store sales have been trending downward over the last few years. There was also an existing environmental condition on a small portion of the property coming from an off-site source.
Commenting on the deal, Highland Realty Capital’s Brad Sevier stated, “This is a well maintained center, and the borrower has a very strong track record as an operator. We were able to get our lender comfortable with the grocer’s sales by pointing to the fundamentals: the relatively low loan per square foot, the high traffic count location in a densely populated submarket, the high barriers to entry, and the consistently high occupancy levels enjoyed by the center year after year.”
In regard to the environmental issue, Sevier noted that, “Greater Los Angeles has many properties that are impacted by environmental conditions generated off site. We were able to show that remediation efforts being carried out by the responsible (neighboring) landowner had reduced contamination levels on our property to non-detect levels, and that receipt of a no further action letter was imminent.”
According to Sevier, the drug store chain recently entered into a new long-term lease predicated on the borrower contributing TI’s toward a complete remodel of the store. The borrower and the lender agreed upon a hold back to the new loan as collateral for borrower’s TI obligation under the new drug store lease.
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