Deal: Continental Funding Group Secures $31M for Four Assets

Continental Funding Group, Los Angeles, secured $30.5 million for California retail, office and hotel assets. 

In Sacramento County, CFG arranged $11.5 million to refinance a retail property and two office properties. With a blended portfolio occupancy rate of just 66 percent in a market that suffered more in the downturn than primary central business districts, CFG recommended that the sponsor cross-collateraliz and pool the assets into one loan. 

The sponsor requested a bridge-like structure with flexible prepay, so CFG secured mini-perm financing priced below traditional bridge debt. The firm also incorporated an earn-out structure to keep the sponsor’s costs down. And by structuring release provisions into the loan documents, the sponsor can sell off assets individually and the loan will resize to the pro-rata share of remaining collateral. The total loan commitment represented 70 percent of total stabilized value.

An international banking correspondent supplied the financing, which included an $8 million initial funding with an additional $3.5 million available for earn-out as tenants sign new leases. The five-year loan floats at 1 percent over the Prime Rate with a 4.25 percent floor.

In Los Angeles, CFG arranged $19 million to refinance a Courtyard by Marriott hotel. The borrower requested a fixed-rate non-recourse loan to refinance an existing loan and provide substantial cash out. CFG found a lender that understood the asset and the borrower’s business plan and would lower its debt yield below 10.5 percent to get a loan amount sufficient to replace the existing loan and provide cash out.

The 195-room select-service hotel received financing sized to 68 percent of value with a 25-year amortization schedule. The 10-year non-recourse loan priced at 4.98 percent.