George Smith Partners Completes $34M in Refis Across Two Properties

September 6, 2011
By Nicholas Ziegler, News Editor

Despite some of the economic news coming out of Washington, including the loss of jobs in the last month, Americans are still spending their money. The retail sector, especially in the right markets, is still poised for a comeback. Capitalizing on that opportunity, commercial real estate banking firm George Smith Partners has arranged more than $34 million in debt to refinance two retail centers at what the company calls “exceptionally attractive terms.”

“Although the retail sector has been one of the hardest hit segments of commercial real estate in this economic downturn, we have begun to see a vast improvement in lender appetite and loan terms,” said Gary E. Mozer, principal and managing director at George Smith. “With better loan terms and today’s record interest rates, it is an optimal time to obtain debt.”

The first refi was secured by Bristol Place, a 75-percent-occupied, Target-shadow-anchored retail center in Orange County, Calif. The client required a 75 percent loan-to-value, $15.5 million senior loan to refinance the maturing loan on the 63,000 square-foot retail center. “The primary challenge of the deal was the tenant base,” explained Josh Roseman, senior vice president of George Smith. “Several of the tenants were delinquent on their rents, and 67 percent of the leases rolled in three years.”

The second transaction, an $18.5 million refinance of an Albertsons grocery-anchored retail property located in Henderson, Nev., presented a different set of challenges. While the property was 98 percent occupied, the tertiary location about fifteen miles southeast of Las Vegas severely limited the number of interested capital providers.

According to a report by Jones Lang LaSalle, low consumer confidence levels and a related high unemployment rate are prolonging the bottoming-out of the retail sector to a greater extent than the other major property types, yet preliminary estimates for U.S. transaction volumes in the second quarter of 2011 rose to $17 billion. Currently, investors are targeting grocery-anchored supermarkets and trophy malls on the one hand, and distressed assets on the other, with little interest in the product in between.

“Overall, the recovery in the U.S. has proven exceptionally strong and momentum is still building across all sectors, while investment activity is broadening both geographically and in terms of asset quality,” said Jay Koster, president of JLL’s Americas capital markets division. “Add to this an improvement in debt-market liquidity and still-attractive spreads and the second half will be even stronger than the first six months of this year.”