LOS ANGELES-In this exclusive look behind a deal, GlobeSt.com learned that a $5.6-million bridge loan for a distressed 45% occupied retail property was successfully secured by George Smith Partners' vice president, Gilda Rivera. The loan for the two-story building in downtown L.A.'s Koreatown closed with a three-year term and a 4.5% interest rate.
The financing will provide capital for the renovation of a ground floor restaurant, as well as refurbishment of the outdated second floor food court, which is currently vacant. The interest-only bridge loan represented 84% of the “as is” value of the property.
From the start, Rivera found that Los Angeles-based lenders were unwilling to finance this loan, she tells GlobeSt.com. The property, which is only 45% occupied, is burdened with a negative cash flow. In addition, she says, the building, which is situated in a highly competitive retail market with significant street level competition, features an unusual layout—another deterrent for potential lenders. Further, she says, the client was requesting a high loan to value.
“Facing an oversaturated market filled with desirable financing deals, we had a nearly impossible assignment: convince a lender to take the risk on this property, in spite of its negative attributes.”
To make it happen, Rivera widened the lender pool and sought out of state lenders and was able to “identify a capital provider in an out-of-state market that would be willing to entertain the idea of financing such a loan.” She then “demonstrated the tremendous opportunity to transition the building's food court into a modern, hip, and aesthetically pleasing dining environment. She highlighted the positive factors surrounding the property, including the location's high foot traffic, as well as the lack of nearby retailers positioned to offer this caliber of food service.”
The loan is structured much like a construction loan, with the funds being released at various project stages, she explains. “The Los Angeles real estate market is currently saturated with deals and qualified borrowers seeking financing. In this market climate, achieving financing on a deal that appears undesirable is often difficult. With that in mind, it's essential for borrowers to work with partners who have deep industry connections in order to widen the lender pool for potential financing.”
Rivera described finding the out of state lender as finding “a needle in a haystack.” And ultimately, she explains, “the out-of-state lender was able to recognize the potential in this property and the value in its location as part of the evolving downtown Los Angeles retail market.”
Further specifics of the client and lender were not able to be obtained by deadline, but we will update as we learn more on the deal.
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
