Chun: For 2017, we are seeing capital allocations from a wide variety of capital sources for cash-flowing assets at the same level or higher than their 2016 goals. However, construction financing has become much more challenging given regulatory changes related to Dodd-Frank and Basel III; we are not seeing much in the way of new construction for power centers since the trend for centers is more experiential in nature (e.g., food/restaurant elements) or allows for increased foot traffic (e.g., medical office).

GlobeSt.com: What is the lending community's view of retail power centers in this market?

Chun: There is still a healthy appetite for best in class power centers. However, lenders are mindful of centers in less trafficked locations and/or those that contain an outdated tenant mix. For borrowers tackling transitional assets, debt funds, certain life-company lenders and banks are willing to provide capital that is needed to effectuate a renovation or refresh a tired center if the borrower has a clearly defined business plan and the ability to execute the same.

GlobeSt.com: What else should our readers know about financing trends for retail power centers in San Diego?

Chun: There is significant interest from a deep pool of institutional and private-capital groups for well-run and well-located assets in the San Diego market. Capital is available across the capital stack, including senior financing, mezzanine/preferred equity, and joint-venture equity.

SAN MARCOS, CA—Pure retail-power-center plays in a secondary location can be more challenging from a financing perspective unless a borrower has a clear strategy for repositioning the tenant base, HFF director John Chun tells GlobeSt.com. Chun, along with HFF associate Sebastian Trujillo and real estate analyst AJ Manas, led the retail debt placement team representing Newport Beach CA-based development companies United American Properties Inc. and World Premier Investments Inc. in placing a 25-year, fixed-rate loan with J.P. Morgan Asset Management for the $92-million refinancing of Grand Plaza, a 356,796-square-foot retail power center with a grocery anchor here. We spoke with Chun about the financing market for this type of asset in San Diego and how lenders view this market for retail power centers.

GlobeSt.com: How common is financing for retail power centers in San Diego?

Chun: There is abundant capital available across the entire capital stack for well-located assets with a diverse tenant base in the San Diego market. Grand Plaza, for example, is anchored by a strong-performing Sprouts Farmers Market, the only Nordstrom Rack in North County San Diego and home-improvement and gardening retailer concept Orchard Supply Hardware, among a host of other national and regional retailers. Centers with an ideal mix of daily-needs and relevant big-box tenants are highly desirable. Pure power-center plays in a secondary location can be more challenging from a financing perspective unless a borrower has a clear strategy for repositioning the tenant base.

GlobeSt.com: Are we likely to see more of it?

Chun: For 2017, we are seeing capital allocations from a wide variety of capital sources for cash-flowing assets at the same level or higher than their 2016 goals. However, construction financing has become much more challenging given regulatory changes related to Dodd-Frank and Basel III; we are not seeing much in the way of new construction for power centers since the trend for centers is more experiential in nature (e.g., food/restaurant elements) or allows for increased foot traffic (e.g., medical office).