Financing Proves Challenging Due to Energy Sector Issues

A $12.9 million non-recourse permanent loan was secured to replace the maturing debt on Frisco Plaza.

FRISCO, TX—The volatility in the energy sector has made financing non-core real assets in Texas more of a challenge, says Quantum Capital . Despite these obstacles, the firm arranged $22.15 million in long-term, non-recourse debt to refinance regional shopping centers in two separate transactions. Managing director, Mike Yim , along with partner, Jonathan Hakakha , arranged the financings. Quantum Capital was able to mitigate many of the lenders’ concerns by demonstrating the sponsors’ successful track record with each asset, along with other industries in the respective markets that would support the centers if the energy sector continued to decline. Yim tells GlobeSt.com: “The continued oil slump has claimed over 28,000 oil and gas jobs in Texas within the first three quarters of 2015. Without knowing when and where the energy sector may bottom out, many CMBS lenders passed on opportunities to finance properties in Texas. Our borrowers purchased Frisco Plaza and Sunset Plaza at the height of the market in 2006 and needed a new high leverage loan to recapitalize the maturing debt. We casted a wide net before we were able to identify two CMBS originators who were willing to overlook the downturn in oil and emphasize more on the sponsors’ track record and financial strength.” In the larger of the two financings, Quantum secured for a Los Angeles-based investor operating as TRT-QL Frisco LP , a $12.9 million non-recourse permanent loan to replace the maturing debt on Frisco Plaza , a 62,500-square-foot retail center. Quantum was able to arrange attractive terms despite lender concerns that a single special use tenant represented a large percentage of the rent roll. Located at Preston Road and Highway 21, the property benefits from its prime location across the street from General Growth Properties ‘ 1.6 million square-foot Stonebriar Centre , the primary retail destination in what is one of the wealthiest and fastest growing suburbs in Dallas. Quantum also secured a $9.15 million permanent loan for another Los Angeles-based investor operating as Rancho Sunset Plaza LP to refinance Sunset Plaza a 90,000-square-foot regional power center in the West Texas city of San Angelo. The asset is located on Sunset Drive at Highway 67 and Loop 306. It is situated in the center of one most active retail areas in San Angelo, with approximately 1 million square feet shopping and entertainment space within one square mile. Sunset Plaza is anchored by Targ et, Bed Bath and Beyond, Petco and Ross .  Other major retailers in the area include Lowe’s, Walmart Supercenter, Sam’s Club, Dillards, Home Depot and Best Buy . Both fixed rate loans were underwritten at 75% loan-to-value and priced at approximately 250 basis points over the 10-year swaps. The financings also included three years at interest only, a difficult task given the properties were located in secondary markets.