Dealmaker: Thorofare Capital Lends $21M in Utah, California
Thorofare Capital, Los Angeles, provided $20.8 million for a Salt Lake City office and retail building and a Los Angeles retail center.
Thorofare Co-President and CEO Kevin Miller and Executive Vice President of Origination Felix Gutnikov arranged $13 million for a 98,000-square-foot office and retail building in Salt Lake City.
Miller said the sponsor sought certainty of execution to acquire the property in an off-market transaction under an expedited escrow timeline. “Thorofare was able to create a highly structured bridge loan with holdbacks and reserves for CapEx, tenant improvements and leasing commissions and quickly underwrote the repositioning plan in order to fund in less than a month from application,” he said.
The property was nearly 95 percent leased at closing to more than 60 small tenants on month-to-month or short-term leases at well below the current market rates. The sponsor plans to remove small tenants floor by floor as it remodels the interiors and restores the exposed brick and ceilings, which could cause net operating income to decline during the renovation. So rather than basing proceeds off historical cash flow, Thorofare sized its loan to the stabilized debt yield by underwriting the market rents and occupancy for creative office space. Thorofare sized the non-recourse interest-only financing to 67 percent of stabilized value.
The four-year loan floats over the 30-day LIBOR index and includes a working capital reserve to cover operating deficits during the renovation period.
Thorofare also provided a Cadence Capital Investment and Oakwood Real Estate partnership with a $7.8 million non-recourse, fixed-rate bridge loan for a 12,500-square-foot retail property in Los Angeles.
“The sponsor plans to perform a full repositioning of the property to attract high-rent retail and restaurant tenants and capitalize on the strong submarket fundamentals,” Gutnikov said. “Our bridge loan provides the sponsor with timely acquisition capital and runway to pre-lease the project.”
Gutnikov said the partnership will engage in permitting and preleasing efforts during the one-year interest-only loan before arranging financing to take-out Thorofare and fund the re-development.
Thorofare’s financing was bifurcated into an A Note and B Note, with the A note representing 68 percent of the combined 80 percent loan-to-value. Thorofare participated with a New York private investment firm that purchased the B Note at closing.