Capital Is Available for the Right Retail Assets

Many believe that retail assets are un-financeable in the current market. It isn’t surprising; the retail market has been significantly impacted by the now yearlong coronavirus pandemic. However, for the right retail assets, there is ample capital available for both acquisitions and refinancing deals.

CenterCal Properties’ recent refinancing transaction is a prime example. The retail owner secured a $274.4 million for a six-property 2.7 million-square-foot retail portfolio on the West Coast. “Capital is tracking retailer performance closely, and it has varied greatly depending on location, business type and ability to adapt,” Kevin MacKenzie, executive managing director at JLL, tells GlobeSt.com.

MacKenzie secured the funds on behalf of the borrower along with JLL senior managing directors Bruce Ganong and Paul Brindley, associate Sam Godfrey and analyst Spencer Bergthold. The JLL team secured five separate 10-year, fixed-rate, non-recourse CMBS loans through JP Morgan Chase. The funds will be used to retire existing debt and rebalance leverage across the portfolio.

The six-property portfolio is located in Seattle, Boise and Salt Lake City, all core markets with growth potential. Four properties are grocery-anchored shopping centers, and the remaining two properties include a power center and a retail strip asset. Each of the properties is fully leased to a mix of national and credit-worthy tenants. These are the qualities that make lenders comfortable signing onto a retail deal in today’s market. “Essential retailers have performed the best, while sectors that have been hit the hardest include entertainment and experiential retailers,” says MacKenzie. “Furthermore, some areas have experienced multiple shutdowns, which puts tremendous pressure on all operating metrics.”

Quality retail assets have actually seen strong interest from lenders and other capital sources through the pandemic. Looking ahead into 2021, MacKenzie expects that lenders will continue to show interest in retail assets as restrictions are lifted. “We have experienced strong debt appetite for centers heavily weighted to essential retail in areas that have remained open,” he says. “The market has also provided liquidity beyond that for historically strong performing centers in the right locations with best in class sponsors. As mandates continue to lift, and more retailers are able to fully open, operating metrics should improve which will give lenders more confidence in expanding debt parameters.”