LOS ANGELES, Calif. – May 5, 2015 – (RealEstateRama) — Commercial real estate investment banking firm George Smith Partners has successfully arranged $22 million in financing for its client, Optimus Properties, LLC and Infinity Redevelopment, LLC, for the acquisition of Juanita Tate Marketplace, a 77,000 square-foot, newly constructed retail shopping center in the South Central neighborhood of Los Angeles, California, according to George Smith Partners’ Senior Vice President Shahin Yazdi.
The property was developed in partnership with the City of Los Angeles and the nonprofit organization Concerned Citizens of South Los Angeles (CCSCLA) to bring retail options and jobs to this dense, low income area of the Los Angeles market.
According to Shahin Yazdi of George Smith Partners, the structure of the acquisition financing was focused on high debt and low equity.
“Our client wanted to secure as much debt as possible for this acquisition in order to conserve the company’s valuable equity,” explained Yazdi. “Ultimately, we were able to secure an impressive 90 percent loan-to-close, allowing our Client to bring the least amount of equity possible to the transaction in order to purchase the property.”
Yazdi notes that, when identifying acquisition financing for the property, one factor that made the investment stand out to potential lenders was the property’s valuation, which far exceeded the purchase price of $24 million. In fact, some appraisers estimated the property value in the $30 million range.
“In addition to the property’s high appraisals, the asset has strong in-place co-anchor tenants, including CVS and local grocery chain Northgate González Markets,” he said. “These tenants, coupled with the limited supply of nearby retail options made this investment particularly attractive to potential lenders.”
Yazdi notes that a complication did arise as a result of the property’s construction loan, which is a City-funded Section 108 loan. This loan type is provided by Cities for projects that help to revitalize neighborhoods through new low-income housing or job creation.
“One caveat of the Section 108 loan is that the City is named as a second trustee,” Yazdi explained. “Based on this, the City would be able to foreclose on the property if the owner were to default on the new acquisition loan.”
In order to make lenders comfortable with the property’s existing loan, George Smith Partners secured a letter of credit to cover the balance of the Section 108 loan until the loan repayment was complete.
“By securing the letter of credit, we were able to provide security for lenders, ensuring that the property would not be able to foreclose to the City at any point in time,” explained Yazdi.
He added, “Though this investment is located in an area of Los Angeles that is still in the process of being revitalized, we demonstrated that the property’s value and potential for growth far out-weighed potential risks. Ultimately, this enabled us to secure our client the financing structure and terms they desired.”
Joseph Shabani, a principal of Optimus Properties explained, “We bought an incredible asset that serves a very underserved community in a first class fashion. We have some more minor upgrades and modifications in mind to make the center even more appealing.”
Kamyar Shabani, a principal of Optimus Properties, added that, “This is another valuable asset for us to add to our portfolio of shopping centers in the Southern California area.”
George Smith Partners was able to secure a 10-year fixed rate loan at 4.187 percent, with two years interest-only, followed by a 30 year amortization. The loan closed at 90 percent LTC and 76 percent LTV.
About George Smith Partners
Founded in 1992, George Smith Partners is a leading national real estate investment banking firm that specializes in arranging financing for commercial and multifamily properties, including acquisition, construction, bridge and permanent loans, as well as mezzanine loans, highly leveraged participating loans and joint venture equity. The company has arranged more than $35 billion in financing since its inception. Additional information about George Smith Partners is available at www.GSPartners.com.
Corynne Randel/ Jenn Quader
Brower, Miller & Cole
Crandel (at) browermillercole (dot) com