Case Study: $17MM Retail Shopping Center | Acquisition | San Antonio, TX

Structured and arranged a combination of long-term, fixed-rate senior debt and joint venture equity to capitalize the acquisition and repositioning of a 102,000-square-foot retail shopping center in San Antonio, Texas.

Challenges

The site had a significantly below-market ground lease for 65% of the total gross leasable area with an anchor tenant that had vacated the site. The sponsor was negotiating a buyout with the tenant that made underwriting difficult for creditors as the NOI would immediately decrease upon termination of the ground lease. However, there was significant potential to increase the cash flow exponentially after lease-up. The use restrictions imposed by the dark anchor made identifying a replacement tenant difficult and, as a result, lenders were concerned about potential vacancy considering the large footprint of the anchor lease. The sponsor required a short timeframe to close in order to meet the purchase and sales agreement timing clause. 

Solutions

Identified a lender who was willing to structure an earn-out, TI/LC holdback, and capital reserves to carry the property through the transitional period post closing and termination of the ground lease. Additionally, structured a JV equity partnership with a foreign fund manager looking for a higher current yield than what was available in core coastal markets.