An $8,000,000 cash out refinance was obtained for this retail center in Florida anchored by a local fitness center, with 8 other locations, had historically been 100% occupied and anchored by a Food Lion grocery store. Food Lion is dark and remains on the lease for many years and and subleased their space to the fitness center. Challenges for the financing effort included
(1) Food Lion, a wholly owned subsidiary of Delhaize, America Inc., had a sub-investment grade debt rating
(2) Two tenant spaces recently became vacant, totaling 10% of the net rentable area
(3) The center had some lender perceived deferred maintenance which the borrower thought was not a problem
To mitigate these concerns Financial Compound structured a springing cash flow sweep, which would go into effect if the fitness center goes dark. Financial Compound searched far and wide for a lender willing to take Delhaize credit risk without requiring an ongoing TI reserve. Financial Compound explained the circumstances surrounding the two tenants who vacated their spaces to demonstrate that this short term vacancy was not a bad reflection on the property. The borrower was in discussion with replacement tenants during the application process, and the loan contemplated a lower mortgage interest rate based on signed leases, at time of funding. With respect to the deferred maintenance, the lender agreed to require a cure of only the deferred maintenance visible from the frontage road.
Loan terms included a 5.81% fixed interest rate for 10 years, 30 year amortization. No lender fee. Non-recourse.
Article Date: 4/30/2019