Commercial Lending - What's Old Is New Again
SOURCE: Real Estate Forum
A. Sean Aguilar was interviewed in the July 2008 issue of "Real Estate Forum" magazine, in a very interesting and timely article called "What's Old Is New Again" by author Michelle Napoli. Here's an excerpt:
Steelhead Capital vice president A. Sean Aguilar was expecting to close at the end of June on the refinancing of a single-tenant property, a deal he began working on about eight months earlier. With its 10 year financing on a Pier 1 Imports Inc. store in Barbourseville, WV coming due, his client got an early start on the process, something Aguilar advises for anyone who needs financing in today's market. The tenancy proved a challenge, since the retailer has had sales performance issues of late. However, the real estate, located on an outparcel of a regional shopping mall, was good.
After speaking with 50 different lenders, only three would write a term sheet on the deal, San Francisco-based Aguilar reports. Ultimately, a regional bank agreed to provide an approximately $1.1 million, five-year loan, which matches the five years remaining on the property's flat 15-year lease with below-market rents. The debt carries recourse, has a fixed-interest rate of 7.25% and leverage of about 60%. The client is happy with the outcome, but "it was tough geting this done," Aguilar says. "The environment has totally changed."
In many ways, the transaction Aguilar describes illustrates the new debt financing landscape for single-tenant, net-leased properties: there are fewer competing lenders and they are more conservative in their underwriting; local and regional banks are increasingly seen as the go-to source of mortgage dollars, particularly for deals with lesser credit and in secondary or tertiary markets; full or partial recourse is back on the table; leverage is lower; and loan terms do not exceed the length of the lease. On the whole, it's back to basics.
Full digital version »
A. Sean Aguilar was interviewed in the July 2008 issue of "Real Estate Forum" magazine, in a very interesting and timely article called "What's Old Is New Again" by author Michelle Napoli. Here's an excerpt:
Steelhead Capital vice president A. Sean Aguilar was expecting to close at the end of June on the refinancing of a single-tenant property, a deal he began working on about eight months earlier. With its 10 year financing on a Pier 1 Imports Inc. store in Barbourseville, WV coming due, his client got an early start on the process, something Aguilar advises for anyone who needs financing in today's market. The tenancy proved a challenge, since the retailer has had sales performance issues of late. However, the real estate, located on an outparcel of a regional shopping mall, was good.
After speaking with 50 different lenders, only three would write a term sheet on the deal, San Francisco-based Aguilar reports. Ultimately, a regional bank agreed to provide an approximately $1.1 million, five-year loan, which matches the five years remaining on the property's flat 15-year lease with below-market rents. The debt carries recourse, has a fixed-interest rate of 7.25% and leverage of about 60%. The client is happy with the outcome, but "it was tough geting this done," Aguilar says. "The environment has totally changed."
In many ways, the transaction Aguilar describes illustrates the new debt financing landscape for single-tenant, net-leased properties: there are fewer competing lenders and they are more conservative in their underwriting; local and regional banks are increasingly seen as the go-to source of mortgage dollars, particularly for deals with lesser credit and in secondary or tertiary markets; full or partial recourse is back on the table; leverage is lower; and loan terms do not exceed the length of the lease. On the whole, it's back to basics.
Full digital version »
