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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.

 

Challenges:

  • 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.
     

Strategy:

  • Highlight institution-like quality of the sponsor.

 

Results:

  • 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.