Summary: Continental Partners arranged the $39,000,000 first mortgage debt financing for an 88,000 SF Class A office asset known as Santa Monica Medical Plaza located in Santa Monica, CA. The transaction featured a 75% loan-to-value, 5-year fixed-rate, non-recourse loan. The Loan proceeds were used to pay off a maturing bridge loan, pay off outstanding mechanic and constriction liens against the property and provide funds for future TI/LC’s renovations for two large office tenants who signed leases, but had not yet taken occupancy.
Opportunity: At the time of refinance the building only had 88% occupancy which made a few lenders cautious, given the lower occupancy rate relative to the submarket. Additionally, the rents tenants were paying were above the market rent survey the appraiser provided for comps. The requested loan amount also would allow the Sponsor to completely cash out of their cost basis having no real cash equity left in the deal. A number of Lenders were not comfortable completely cashing out for sponsor. Continental Partners approached a number of Lenders including banks, CMBS lenders and life insurance companies looking for an appropriate Lender who understood the value of the real estate, the business plan and the sponsorship strength.
Result: Continental Partners provided a market rent comp survey to the Lender and appraiser focusing on medical office comps in Santa Monica, which ultimately justified the loan amount. The Lender provided a fixed rate loan to take out the existing loan and provided the Sponsor enough proceeds to meet their cash out needs. In addition, the Lender worked with the Sponsor in providing a flexible prepayment structure, allowing the Sponsor to sell the asset without paying any significant prepayment penalties.