ValueXpress obtained a $4.8-million first-mortgage loan that was utilized to refinance existing debt secured by a 28,000-square-foot neighborhood shopping center located in Mansfield Township, Warren County, New Jersey. The property is currently 100% occupied by 12 tenants and is anchored by an AT&T wireless store. The property was constructed in 2009 and is in excellent condition. The loan transaction was structured as a 10-year term based on a 30-year amortization schedule. Loan-to-value was 70% and the property provides 1.30x net cash flow DSCR on actual income and expenses.
“The transaction had its challenges,” noted Michael D. Sneden, Executive Vice President of ValueXpress. “But the sponsor was relentless; I have never worked on a transaction in which the sponsor was as tenacious at solving issues. On many transactions I am proud of the value we add to the deal, but not on this one: It closed because the sponsor simply would not give up,” said Sneden.
Two of the more acute issues were an encroachment by a neighboring property onto the subject property. The good news is the sponsor was part-owner of the neighboring property; the bad news was he did not get along with the other partners. After a battle, the parties agreed to swap interests in other assets in a complicated transaction that provided the sponsor with 100% ownership of the encroaching parcel, but at a heavy cost.
Then the current lender, a community bank, had an option to acquire an interest in the borrower. The new CMBS conduit lender was okay with a community bank becoming a partner in the borrower, but the community bank wanted to be able to transfer the option to a third party without the conduit lender’s consent. The conduit lender said no (“You could, in theory, transfer it to a criminal!). After much sabre rattling, the sponsor got the community bank to relent at the 11th hour.