Hudson Team Arranges $72M in Financing to Refi Retail Centers in Washington, California
- Nov 01, 2013
The Hudson Team of George Elkins Mortgage Banking Company arranged financing for two CMBS loans totaling $71.7 million, secured by two neighborhood retail centers in Fullerton, Calif., and Lacey, Wash.
According to Jeffrey Hudson, George Elkins Mortgage Banking Co.’s principal, the CMBS structures enabled both borrowers to get competitive 10-year fixed rate financing with 30 year amortization.
The firm provided Orangefair, L.L.C. a $44.8 million permanent fixed rate loan to refinance the Orangefair Marketplace, a 324,806-square-foot retail center located at East Orangethorpe and South Harbor Boulevard in Fullerton.
“Its tower centers out in Southern California with a lot of big box retailers,” Hudson told Commercial Property Executive. “The reason it was attractive to lenders is the density of the marketplace, it’s a very high-traffic location.”
Orangefair, L.L.C. originally purchased the open-air center in 2002 and completed a multi-million renovation in 2004. The center is currently 98 percent occupied to a mix of more than 30 local and national retailers, including a 31,000-square-foot Marshalls as its anchor, and stores such as Best Buy, Michaels, Skechers, and Burlington Coat Factory.
“The challenge to the project was the different lease terms within the rent roll and the ability on the CMBS side to show the cash flow would remain steady for the term of the loan,” Hudson said. “We ended up doing it with a CMBS lender by virtue of putting together a good deal of structuring and reserves so when lease maturities arrived during the term of the loan, we had enough money set aside to handle PILCs and if necessary, any downtime in the leasing.”
In a separate financing, The Hudson team arranged a $26.9 million loan for The Landing at Hawks Prairie, L.L.C. to refinance The Landing at Hawks Prairie, a neighborhood retail center in the Olympia suburb of Lacey, comprising 117,000 square feet of pad and inline space.
“Lacey was quite different. It was a suburb of Seattle, much more of a rural location, and this center was within a large retail area,” Hudson added. “What was attractive to lenders was the diversity of the rent roll, and what was challenging was the anchor tenant is a gym, and although a strong and well reputable gym, gyms as an anchor tenant are challenging for lenders across the board. They don’t provide financials, and the lease term came due within the term of the loan.”
The retail center was originally developed in two phases between 2008 and 2013. It currently is 93 percent leased to a mix of retail and restaurants, including LA Fitness, Red Robin, Navy Credit Union, Mattress Depot, Popeye’s, Hand & Stone, and Kiddie Academy. The center is shadow anchored by a Costco, Home Depot and Walmart Super Center.
“Again, we were able to structure the loan in a manner that the lender was secure that they would have enough money set aside in the event that the gym departed prior to lease maturity,” Hudson concluded, “and enough diversity in rent roll where they were satisfied the property would remain stable.”