Dealing With Challenging Loan-Assumption Scenarios

Coo: “Sale transactions requiring loan assumptions are common due to the fact that the loan prepayment penalty exceeds the marginal value increase if the property were available without the loan or ‘open to new financing.’”

Part 1 of 2

RANCHO SANTA MARGARITA, CA—In cases where landlords know their mortgage is a high-leverage loan, it could create a refinance scenario where ownership is required to inject a large amount of fresh capital, Faris Lee Investments‘ Nicholas Coo tells GlobeSt.com. As we recently reported, the firm represented both buyer and seller in the sale of Plaza El Paseo at Rancho Santa Margarita Town Center, a legacy-quality shopping center here, for $56.6 million despite a $32-million encumbrance. In part 1 of this two-part exclusive feature, we spoke exclusively with Coo and Faris Lee president and CEO Rick Chichester about retail deals with encumbrances and advising clients with a challenging loan-assumption scenario. In part 2, we speak exclusively with Chichester and the firm’s Chris DePierro, about helping buyers see a long-term vision in retail properties.