There were also some near term rollover in the leases, which is never a plus during underwriting. Another messy component was the retail portion of the asset, which is all condo.

On the plus side, the property had a low LTV, which helped secure a good financing package with the life insurer, Lerer said.

In truth, none of this is rocket science. GFI explained in detail to the lender how the percentage rent and other income streams and expenses aligned with the cash flow projections for the new loan, Lerer said. That required a lot of paper pulling — that is, going back years to match up rental payments with costs — to support its proposal. The lender had questions, Lerer said, but then they all do. “Once we laid it out for them, they understood the situation.”

GFI expects to do more business in Washington DC in large part because, as this deal illustrated, even smaller loans are becoming more complicated.

“We don't expand focusing on geography,” Lerer said. “We basically chase the deals that we feel we have a competitive advantage.”

WASHINGTON, DC—New York City-based GFI Realty Services recently closed its first financing in the Washington DC area, doing what it says it does best: securing financing for complex or unusually-structured transactions.

GFI Realty's finance group, led by Daniel Lerer and Will Watkins, secured approximately $21 million of long-term, fixed-rate financing in two separate transactions for the private owner of a 42,500-square foot retail and office complex located in Georgetown at 3251 Prospect St., NW and 3222 North St. NW (or better known to Washingtonians as Cafe Milano). An Indianapolis-based life insurance company provided the funds.

Of course, based just on that description, the transaction sounds more routine than rogue.

But a deeper dig into the deal shows otherwise. “The property has some very complicated underwriting,” Lerer told GlobeSt.com. For starters, the leases, which were signed more than twenty years ago, were structured as percentage rent, meaning the tenants pay a percentage of their sales instead of a fixed rental rate. This was occasionally used back in the day, but it is rare to see it now.

There were also some near term rollover in the leases, which is never a plus during underwriting. Another messy component was the retail portion of the asset, which is all condo.

On the plus side, the property had a low LTV, which helped secure a good financing package with the life insurer, Lerer said.

In truth, none of this is rocket science. GFI explained in detail to the lender how the percentage rent and other income streams and expenses aligned with the cash flow projections for the new loan, Lerer said. That required a lot of paper pulling — that is, going back years to match up rental payments with costs — to support its proposal. The lender had questions, Lerer said, but then they all do. “Once we laid it out for them, they understood the situation.”

GFI expects to do more business in Washington DC in large part because, as this deal illustrated, even smaller loans are becoming more complicated.

“We don't expand focusing on geography,” Lerer said. “We basically chase the deals that we feel we have a competitive advantage.”