Financial Compound has been able to procure $7 million of institutional refinance proceeds for this Kmart (on a short term lease) anchored neighborhood retail center in the Midwest. The center was originally anchored by 4 big-box tenants all of whom suffered chainwide bankruptcies. This left the borrower a 220,000 sf center occupied only by Kmart. The borrower filled in the vacant spaces to 75% occupancy with smaller tenants, changing the dynamic to a multi-tenant center with primarily short term tenant leases. Kmart store sales at this location are decent, although nothing to write home about. Not many commercial mortgage lenders were interested in this transaction, although Financial Compound was able to identify one commercial mortgage lender to close the deal. Loan terms included 98% of all-in-cost (including refinance proceeds, TI and leasing reserves), 9.15% interest rate, 1.45 DCR, 3 years interest-only, with two 12 month extension options, non-recourse, 2% lender fee, prepay penalty 2% in first year.
Commercial mortgage broker Financial Compound canvassed more than 150 lenders over a two year period to locate this lender who viewed the transaction as positively as us. In general, the capital markets shy away from tertiary markets, and Kmart anchored centers. However, with a closer look at this transaction Financial Compound helped the lender to notice the superlative aspects of this transaction.