Summary: Continental Partners sourced 10-year fixed, non-recourse financing for the Redmond Heights Center – a 125,000 square foot industrial/office flex property in Redmond, Washington. The $18,750,000 loan funded at 60% LTV and a 1.40 DCR. The interest rate was fixed for 10-years and priced at 165 basis points over the 10-year swap rate, which rate locked at 3.25%. The loan amortizes over a 30-year schedule.
Opportunity: Based on market comps, the property’s rents were more than 25% below market on average, with substantial tenant roll in the first 3 years of the upcoming loan term. This provided tremendous opportunity for the new owner to organically increase rents and overall property revenue through lease renewals and negotiations. The 10-year swap rate was also drastically fluctuating on a daily basis, and once locked, increased dramatically, providing a lot of value. The Sponsor was unlikely to proceed if we didn’t meet the low interest rate request as I was competing with a larger national brokerage firm. The Sponsor was also leaning towards non-recourse financing given their current appetite for debt.
Result: Continental Partners approached more than 25 Lenders with this request and was able to procure 11 quotes. The Sponsor elected to proceed with the most competitive non-recourse proposal. The funding Lender was an international correspondent of Continental Partners’. Continental Partners worked with the acquisition team for the sponsor and appraiser to derive a fair valuation and held its ground when challenged by the Lender to fund per the terms of the application. Continental Partners monitored and timed the market to rate lock on a day with a market drop, so all parties involved walked away pleased with the results