Retail Properties:

Anchored or unanchored single-story retail centers. For long term debt financing, lenders prefer that property have occupancy stabilized at around 85 to 90% and should be a strong sales generator in the market. Lenders will consider repositioning or new construction opportunities in a strong retail market.  Lenders will also consider unique properties and free-standing stores on a case-by-case basis. Most prefer credit tenants with greater than five years remaining on the lease term

Lenders like to see direct access to major roadways and high visibility. They prefer infill locations in developed neighborhoods in high traffic areas. Where direct competition exists, the property is required to exhibit a stronger market appeal than the competition or a history of retaining its tenancy, sales volume and competitiveness. Smith-Craine will broker retail properties nationwide;

Loan Size:

$1Million and up

Debt Service Coverage:

Generally, 1.20 to 1.30, depending on the quality of the location of the market, the property and the existence and quality of anchor tenants.

Loan-to-Value Ratio:

Up to 80% maximum LTV in first position for permanent financing. Higher leveraged requirements should inquire about mezzanine debt options. Repositions and development opportunities may fund up to 90% LTC and mezzanine loans may be available also.

Loan Term:

7, 10, 15, 20 and 25 year terms available for permanent financing. AD&C loans from 12 -36 months.

Amortization:

30 years or less, depending on major lease terms and expiration, and property age.

Fees:

Smith-Craine fees are 1.5 - 2% of the loan amount. Lenders application fee and other deposits vary based upon the project

Anchored / Unanchored :

Allowable anchors include supermarket-drug stores, discount department stores, dry goods, retail and home improvement stores. Financially healthy national, regional or local chains are acceptable. Anchor tenant leases should have at least five years remaining on their leases, as of the date of closing. Anchors should exhibit strong sales histories.

NOI Calculation:

Lenders like to receive three full years of operating history. Credit Tenants - Credit tenants (BBB- or better) with base lease terms exceeding five years beyond the final loan term typically may be excluded from vacancy, Tenant Improvement and Leasing Commission reserves.
Expenses - Lenders underwrite expenses using the greater of actual 12 months trailing, last two years historical, along with the market/industry average. Expense recovery must reflect the stabilized operating history of the project.
Vacancy - Will be the higher of actual or market with a minimum of 5%. A vacancy factor will be taken on all credit/anchor tenants if the lease term is less than the loan term.
Rent Roll - Lenders like to see a smooth lease expiration schedule so that the debt coverage ratio in any given year does not fall below break-even. However, many lenders will consider properties with rollover risk on a case-by-case basis. Tenants not occupying space and paying full rent for at least 3-months will require a reserve equal to 3-months rent.
Management Fee - 5% of effective gross income. Single tenant buildings that are fully maintained and managed by the occupant can be underwritten at a +/-3% management fee.

Reserves - $.10 to $.25 per square foot for structural reserves depending on the property age and condition and adjusted in accord with the engineering report. Determine Tenant Improvement and Leasing Commission reserves from the rollover schedule and market averages.

Fees - 1.5 - 2% of loan amount

Third Party Fees: An appraisal, survey, seismic/engineering and environmental report are required. Existing reports may be acceptable, however will require lender approval. Lender may request updated reports if reports presented are dated

Sample Retail Analysis will demonstate how demontrate how the right financial package will effect your investment returns