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Debt Placement - Case Studies

Multi-State Net Lease Portfolio:  Life Company Financing


Transaction Summary:

Target Rock Partners was retained by a private real estate company to finance a portfolio of 18 single tenant, net leased properties.  The sponsor acquired the properties in separate all-cash transactions that occurred over the previous 2-3 years.  The new loan would be the initial financing of the portfolio and corresponded with the sponsor’s desire to redeploy a portion of its invested capital in new real estate acquisitions.  While its other net lease holdings were previously financed with CMBS debt, the sponsor preferred to explore an alternative capital source for this portfolio.


With the exception of one light manufacturing facility, the properties were primarily retail uses occupied by national tenants including restaurants, automotive stores, pharmacies and dollar stores.  Approximately 75% of the tenancy had corporate debt rating of BBB- (investment grade).  The combined average remaining term of the leases was 16 years.   The locations were secondary and tertiary markets from the East Coast to the Midwest.



  • Small average per property loan size of $2.2 million.

  • Multiple locations in secondary and tertiary markets

  • Sponsor preferred conservative, non-recourse financing from a source other than a securitization program.

  • Non-rated tenants comprised approximately 25% of the portfolio.

  • Sponsor requested release prices to allow for potential future sales of individual properties.

  • Sponsor required flexible closing date to accommodate the logistical challenges of financing multiple properties in numerous states.



  • Focus on life companies and commercial banks.

  • Emphasize credit support of portfolio backed by investment rated tenants.

  • Emphasize low loan to acquisition cost of 65% and substantial equity (over $20 million) remaining in the transaction.



  • Target Rock Partners (TRP) arranged a $40 million, non-recourse loan with a life company on self-liquidating term that matched the average remaining lease term of the portfolio.

  • TRP negotiated release provisions with the lender that allowed the sponsor flexibility in selling individual properties at a future date.

  • The lender agreed to a generous commitment period.  Total time elapsed from application signing to loan funding was 5 months due to the borrower’s time line.

  • Borrower obtained very attractive interest rate.​

Mid-Atlantic Commercial Portfolio:  Refinance – Large Loan


Transaction Summary:

Target Rock Partners was retained by a private real estate company to refinance a 52 property portfolio containing a mix of B and C quality industrial, office and retail properties located in the Mid-Atlantic.  The properties were encumbered by multiple loans the largest of which was a securitized portfolio loan with 2 years remaining in the term that required a defeasance payment upon a refinance.  Despite the cost of defeasance, the sponsor pursued new financing to take advantage of low interest rates and lender appetite for a large loan comprised of diverse commercial property types.  The ability to maximize equity recapture was important to the sponsor who was eager to pursue new commercial real estate acquisitions.



  • Multiple existing loans, lenders, maturity dates and prepayment provisions.

  • Complex ownership; the borrower structure varied from loan to loan.

  • The sponsor required a cash-out to facilitate new acquisitions.

  • Existing securitized loan was not open to prepayment so new financing would need to cover the cost of defeasance in addition to providing the sponsor with enough proceeds to carry out its acquisition plan.

  • While well maintained, some of the properties in the portfolio were older and had not been significantly updated or modernized.



  • Highlight institution-like quality of the sponsor.



  • Target Rock Partners (TRP) arranged a $153 million ($3 million average loan size), non-recourse loan that paid off and defeased the existing loans as necessary and provided the sponsor with significant proceeds to pursue new acquisitions.

  • TRP arranged the defeasance of the existing first mortgage and guided the borrower through the defeasance process.  In addition, TRP assisted the borrower in negotiating the defeasance provisions of the new loan. 

  • Expedited closing occurred within 40 days.

  • Very aggressive appraised value and high LTV.

Maryland Mixed Use Property:  Bridge Financing


Transaction Summary:

Target Rock Partners was retained by a private real estate company to arrange acquisition financing for the off-market acquisition of an 80,000 sf retail center with second floor office space located in suburban Maryland.  The developer of the adjacent residential neighborhood constructed the shopping center as an amenity to the residents.  However, the timing of its completion coincided with the global financial crisis which limited the developer’s ability to invest additional capital in the remaining build out and leasing of the second floor office space.  In addition, with a specialty in single-family home development the developer lacked the commercial expertise and tenant relationships necessary to stabilize and realize the full potential of the center through long term ownership.   The property was an ideal value-add opportunity for the borrower who had been scouring the Virginia and Maryland markets for unique transactions with upside potential.



  • While experienced in commercial real estate, the borrower partnership was a newly formed real estate firm with limited investment capital.

  • Overall, the property was 40% vacant.  The 1st floor retail was 25% vacant and the second floor office space was 65% vacant.

  • The borrower required the flexibility of short-term financing to carry out its business plan and realize value creation by way of sale or permanent refinance in 2-3 years. 

  • Office market still in recovery from the low point of the financial crisis compounded by weaker demand for second floor office space.



  • Target bridge lenders with the ability to fund a high leverage, low debt service coverage loan which would reduce the borrower’s equity requirement and provide proceeds for the stabilization of the property.

  • Target bridge lenders with the ability to offer advantageous permanent financing upon fulfillment of borrower’s business plan.



  • Target Rock Partners (TRP) arranged a $12 million, 2 year interest only loan with a bridge lender.  The loan equated to 85% of the total capitalization and 95% of the purchase price.

  • The new loan allocated funds for the buildout and lease up of the 2nd floor office space and the remaining vacancies in the 1st floor retail.

  • TRP negotiated a release provision at par which enabled the borrower to sell off two out-parcels (a drug-store and restaurant) soon after loan closing.  The proceeds of the sales would be used to reduce the loan balance.

  • TRP invested equity in the transaction from its discretionary capital account to round out the total equity required at closing.  The investment by TRP further aligned its interests with the borrower and gave the lender comfort in making a loan to a new organization.

Texas Limited Service Hotel Portfolio: Refinancing


Transaction Summary:

Target Rock Partners was retained to refinance the maturing debt of a 3 property, 240 room limited-service hotel portfolio in Texas.  Two of the properties were encumbered by high interest, recourse construction loans with nearing maturity dates.  The hotels had limited operating history (1 -3 years) and had not yet reached stabilization.  Since the properties had not reached stabilization, the property cash flow did not yet support a full-leverage first mortgage to take out the existing construction loans.   Target Rock Partners sought lenders that could provide both a first mortgage loan plus a small mezzanine loan.


Target Rock Partners arranged a new non-recourse loan equal to 70% LTV for a term of 5 years on a 30 year amortization schedule which enabled the borrower to repay its existing construction loans.



  • Limited operating history; properties not fully stabilized.

  • Secondary markets.

  • Seasonal fluctuations in occupancy and cash flow.

  • Aggressive appraisal required due to high construction loan balance and properties not yet fully stabilized.

  • Hotel flags not considered top-tier.



  • Target securitized lenders who would offer maximum proceeds plus ability to write a small mezzanine loan.

  • Emphasize the property’s continual operating improvement and strength of the management team.

  • Negotiate a favorable reserve structure with the Lender to address the seasonal fluctuations in occupancy and net operating income.

  • Identify appraiser with specialty in hospitality valuations.



  • TRP arranged and closed on a new fixed rate loan at 70% LTV, with a 5 year term and 30 year amortization schedule. 

  • Proceeds enabled the borrower to repay its high interest construction loan, fund a seasonality reserve and remove recourse obligations.




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