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| J.M. Grimaldi |
SACRAMENTO, CA -–
Commercial real estate mortgage banking firm Continental Partners, formerly
known as Continental Funding Group, has successfully secured $21.4 million in
refinancing for a 152,719 square-foot shopping center in Sacramento and a
149,620 square-foot, retail property in Los Banos.
The financing was arranged
by Continental Partners Executive Vice President J.M. Grimaldi.
“Lenders across the board are being
more conservative when it comes to financing commercial deals, especially
distressed assets in secondary and tertiary markets,” says Grimaldi.
“With the Dodd-Frank regulations taking effect
this month and an anticipated increase in interest rates on the horizon,
lenders are lowering their loan proceeds and are pricing in interest rate hikes
in their underwriting. Given the anticipated rise in interest rates, many
borrowers are looking to refinance and are pursuing long-term loans to lock in
lower rates.”
The sponsor, a private real estate
investor that specializes in acquiring and repositioning underperforming
assets, had requested the most competitive terms available to refinance two
value-add retail properties located in a secondary and tertiary market,
according to Grimaldi.
“In the first transaction, the
borrower needed a fixed-rate loan to refinance the Sacramento retail asset and
cash out the proceeds to invest in new acquisitions,” continues Grimaldi. “The
challenge, however, was that most lenders were underwriting the loan with an
unfavorable appraisal based on comps in the area.”
Continental Partners approached a
number of lenders that would originate a loan based on the retail property’s
new leasing activity and stabilized value. In 2013, the asset was highly
distressed and only 57 percent occupied. At the time of refinancing, it was 93
percent occupied, with a new lease signed with CircusTrix, an operator of
indoor trampoline parks.
“By demonstrating the potential
value of this asset and emphasizing the sponsor’s long-term investment
strategy, we were able to increase the loan covenant from 65 percent to 70
percent,” explains Grimaldi.
“Further, we structured a
competitive fixed-rate SWAP product that would allow the sponsor to generate
additional yield should the prime index increase, which is likely given the
anticipated interest rate hike. In doing so, we were able to achieve a debt
coverage ratio of 1.40 and meet the borrower’s objectives in cashing out as
much as possible for future investments.”
Continental Partners
secured the $11.9 million loan from an international bank. The seven-year loan
was structured with a loan-to-value of 70 percent with an amortization of 30
years. The property is located at 5400 Date Avenue in Sacramento, California.
In the second transaction,
the sponsor requested a competitive fixed-rate product to refinance a
JC-Penney-anchored retail center in Los Banos, California.
“The property’s location
in a tertiary market, coupled with its current tenant mix, presented an initial
challenge,” notes Grimaldi.
“The anchor tenant, JC-Penney, is in its first
option period of the lease with no sign of renewing. Based on these factors, we
utilized a unique loan structure to obtain the best rates available on behalf
of the sponsor.”
Continental Partners
sourced a state chartered credit union that understood the sponsor’s value-add
investment strategy and the potential value of the asset upon stabilization.
The firm arranged the loan commitment based on the total stabilized value and
incorporated an earn-out structure, enabling the borrower to draw the remaining
funds over the next 12 months.
“By incorporating a good
news money structure, which would release additional loan proceeds upon
stabilization of the asset, we were able to obtain a fixed-rate product with a
flexible pre-pay option,” confirms Grimaldi. “In doing so, we eliminated the
interest rate risk over the next year and secured an optimal financing solution
on behalf of our client.”
Continental Partners
arranged the $9.5 million loan, with $6.5 million available in initial funding
based on the acquisition cost covenant.
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| Mitch Paskover |
The 15-year loan was structured with a
loan-to-cost rate of 70 percent with an amortization of 30 years. The property
is located at 911-963 West Pacheco Boulevard in Los Banos, California.
Both of these financing
transactions come on the heels of the firm’s rebrand launch. Formerly known as
Continental Funding Group, the Los Angeles-based commercial mortgage banking
firm has recently rebranded as Continental Partners.
“As the commercial real estate
industry continues to evolve, we recognized the need to evolve with it,”
explains Mitch Paskover, President
of Continental Partners. “The real estate sector has shifted toward greater
transparency and collaboration, both of which are key to thriving in this
competitive market.
“Our name change reflects
our deep commitment to fostering collaboration among our team members, and will
position us for growth in the year ahead.”
For a complete copy of the company’s news release,
please contact:
Katie Kea / Lexi Astfalk
Brower, Miller & Cole
(949) 955-7940
