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$4,000,000 Acquisition for Single Tenant Tractor Supply

2 – 9 – 2014
Transaction Description:  George Smith Partners arranged acquisition financing for a single tenant Tractor Supply located in a tertiary northern California market. The property was acquired as one of three properties purchased by a borrower in a 1031 exchange. Although the subject is 100% leased to a national credit tenant, lenders were concerned about the “dark value” given the lease term is inside the 10 year loan termination date and the thin commercial market. 65% leverage was required in order for the Borrower to complete his acquisition of the other two properties in this exchange. The capital provider recently funded a similar transaction for a Tractor Supply and was comfortable with the probability that Tractor Supply will renew at lease expiration. The non-recourse, 5.20% fixed rate loan is amortized over 25 years.
Rate: 5.20%
Term: 10 Years
Amort: 25 Years
LTV: 65%
Prepayment: Defeasance
Non-recourse
Lender Fee: Par
Advisors:  Stephen Stein, Teddy Stutz

Related Financings

  • $7,000,000 Non-Recourse Financing for a Single Tenant Investment Grade Retail Property in Suburban Northern California

    February 22, 2017

    Transaction Description:

    George Smith Partners successfully placed ten year fixed rate financing on a single tenant retail property located in Northern California. The building is occupied by a national drug store tenant on a 75 year lease with a 2032 termination option. The tenant signed a fixed rate lease at the top of the market in 2007 but reported year over year sales decline since 2012 due to increased competition in the trade area. These two factors resulted in a high occupancy cost. GSP identified a national lender able to underwrite the tenant’s full rent because of the lease’s long-term investment grade characteristics, despite the high current occupancy cost. Additionally, GSP highlighted the recent closure of another drug store in the trade area that will increase the tenant’s market share going forward and increase sales. The loan structure includes five years of Interest Only payments to maximize Sponsor cash flow, then converts to a 30-year amortization schedule. The 67% leverage loan has a fixed rate coupon of 4.87% for the 10-year term.

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  • Single-Tenant Refinance – 65% LTV in a Tertiary Market

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    Rate: 4.35%
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  • $3,680,000 Permanent Financing for a Single-Tenant Co-Op Grocery Store

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    9 – 3 – 2014
    Transaction Description:  JJay Brooks secured a permanent loan for a non-credit single tenant grocer in a tertiary Northern California market. This financing provided a consolidation of the existing 1st Trust Deed and a higher yielding 2nd. As a build-to-suit, the lease rate was established as a return on cost. That and its’ tertiary location complicated the appraisal comparative process. Mr. Brooks identified a capital provider who was comfortable with the sales history and structured a tighter amortization period to minimize event risk. The 7 year term loan was sized to 65% LTV and is fixed at 4.90%, amortized over 15 years. This portfolio lender offered a step-down prepayment with the final two years open without penalty.
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    5 – 28 – 14
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    George Smith Partners arranged the cash-out refinance of a single-tenant property located in the southwestern United States, occupied by a Canadian mattress company. The Borrower purchased the property all-cash at the end of 2013 and sought to recapitalize his liquidity to acquire additional investment properties. Without a US parent company, many capital providers were hesitant on quoting this opportunity. GSP identified a local portfolio lender comfortable with the corporate lease guarantor and underwrote the location and long-term value of the property. The 10-year term is fixed for five years at 4.50% and does not carry a pre-payment penalty.

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    April 17, 2014

    4 – 16 – 14
    Transaction Description:  George Smith Partners arranged the cash-out refinance of two single-tenant properties located in Colorado and North Carolina. Although both are occupied by the same national auto parts supply company, the two loans for the same Borrower stand alone and are not crossed. The North Carolina asset was recently purchased with only a few years remaining on the lease. Our Sponsor was successful in negotiating a new long-term lease with the tenant prior to funding. GSP identified an institutional portfolio lender that is executing similar business plans and gave credit for the immediate increase in the capitalized value in allowing for the return of equity.
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  • $1,620,000 Acquisition Financing for a Single-Tenant Auto Related Property

    April 10, 2014

    4 – 9 – 14
    Transaction Description:  George Smith Partners successfully placed the 65% loan to purchase (67% loan to value due to a low appraisal) acquisition financing of a Pep-Boys auto repair store in New York State. The borrower acquired the property as the replacement property in a 1031 tax deferred exchange. The 20 year amortized term is fixed for 5 years at 5.0% prior to being recast for the second 5 year term at then prevailing rates. A step-down prepayment was structured to provide for future flexibility.
    Challenge: With only 9 years remaining on the initial lease term, institutional lenders are leery of event risk on single tenant properties. The auto-bays added a specialty-use component to the collateral should the tenant not renew one year prior to the loan termination date. An environmental concern was also raised by a number of portfolio lenders polled. All borrower contingencies were removed to secure control of the property in what was a very competitive bid process. Certainty of close as applied for and timely execution was paramount to avoid severe tax consequences. The appraisal came in less than the purchase price, thus jeopardizing loan proceeds.
    Solution: Mr. Stein quickly identified a local lender officed minutes from the property who immediately inspected and reviewed the property information. Their “in the market knowledge” gave a comfort that this location would quickly release to an identical user should Pep Boys vacate. A clean Phase I report mitigated all environmental concerns. A full credit committee commitment was issued within 24 hours of loan submission conditioned only upon 3rd party reports. Despite the low valuation, GSP worked with the lender to quantify lender risks for this cash-in execution and established a comfort level to extend their LTV constraint by an additional 2 percentage points.
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