MONTEREY PARK, CA-Continental Funding Group has arranged a $74 million refinance of the construction loan for Atlantic Times Square, a mixed-use property here. Mitch Paskover, president of CFG, brokered the transaction.
The recently completed Atlantic Times Square is a six-story project with 210 residential condominiums in three towers over retail. The commercial component contains 213,531 square feet of grade level retail space over a three-level subterranean parking structure that provides parking for 1,650 vehicles. The development is situated on a rectangular-shaped parcel totaling 6.94 acres on the southeast corner of North Atlantic Blvd. and West Hellmen Ave.
The borrower, Atlantic Times Square II, an entity created for this transaction, leased two towers with 50 residential units each as apartments. This component has 100 residential units of 40 two-bedroom units and 60 three-bedroom units. The two-bedroom units range in size from 1,384 to 1,496 square feet and the three-bedroom units range in size from 1,615 to 1,939 square feet. The residential units contain a total net rentable area of 166,560 square feet. The residential component is 99% leased.
The retail component is 94% leased to a mix of retail uses. Anchor units include a 14-screen AMC Theatre (75,000 square feet) and a 24-Hour Fitness center (30,842 square feet).
Paskover tells GlobeSt.com that the development area didn't have a high-end multifamily project. “We're seeing a lot more mixed-use being built,” he says. “It brings people together and creates more traffic in the area.”
A key to the project was the large Asian community in Monterey Park. The developer recruited a number of high-end Asian restaurants to supplement the national tenants.
“If you went during lunch or dinner, there was an hour wait at some of the restaurants,” Paskover says. “Dim Sum creates traffic for the entire center. While they're waiting for their table, they are out shopping in the center.”
Paskover says the refinancing was “a little bit of a challenge” because of lender concerns over the movie theater. The general decline of movie-going raised issues. “It's coming back now, but the last three, four years, lots of sales per screen in theaters are going down.” As a consequence, lenders were concerned about his particular venue's sales per screen, a problem because the theater did not have a long history. “It was a little tough deal because of that.”
In the deal, the borrower requested a non-recourse loan that would refinance a large portion of the construction loan. “Most lenders will underwrite a theater-anchored center with debt yields between 9% and 10% based on the trailing 12 month income,” says Paskover. “A number of lenders who quoted the transaction were coming up with a loan amount that required the borrower to put in additional equity at the close of escrow.”
Continental approached banks, CMBS lenders and life insurance companies and was able to find a lender that understood the asset and the borrower's business plan, Paskover says. “The lender lowered their debt yield below 9% to get to a loan amount that would replace a large portion of the construction loan without putting in additional equity to close escrow. The loan closed in less than 30 days from start to finish.”
Continental Funding Group was founded in 2006 as a commercial real estate investment banker providing market insight and creative financing strategies.
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