Dealmaker: MetroGroup Realty Finance Provides $27M

MetroGroup Realty Finance, Newport Beach, Calif., provided $26.7 million for industrial and single-tenant assets in three states.

6013-6021 Randolph Street.

In Commerce, Calif., the firm provided $15 million in refinancing with a cash-out component for a 168,000-square-foot multi-tenant industrial asset located at 6013-6021 Randolph Street. MetroGroup Vice President Ivan Kustic arranged the financing.

“The sponsor, who acquired the asset in 2003, wanted to take advantage of the low interest rate environment by replacing the existing loan on the property with one that was more competitively priced,” said Kustic. “They were also seeking a portion of cash out to invest in other commercial properties.”

MetroGroup secured a 10-year fixed-rate loan for the warehouse and distribution facility with a 93,000-square-foot building and a 75,000-square-foot building. Kustic noted the sponsor added the 75,000-square-foot building in 2009.

“The original 93,000-square-foot building was previously occupied by the sponsor’s business up until 2017,” Kustic said. “Since then, the sponsor successfully leased the space as a multi-tenant property for warehouse/distribution and office tenants, creating significant value at the property. The remaining 75,000-square-foot building has been leased to third-party tenants since its development.”

Kustic said the challenge when seeking this refinance was addressing historical occupancy. “Because the sponsor occupied a majority of this property for most of its ownership, there were limited financial results available to demonstrate the asset’s strong historical performance to lenders,” he said. “We were able to prove the strength of the Commerce market, which is one of the most dynamic industrial submarkets in the U.S.”

CBRE reported industrial vacancy in Commerce recently fell to one percent and lease rates have increased 9.8 percent year-over-year.

MetroGroup also provided $11.75 million in financing to private investors for three separate 1031 exchange transactions involving single-tenant triple-net lease assets in Illinois and Texas.

Kustic and MetroGroup Vice President J.D. Blashaw arranged financing for the following properties:
–5001 North Big Hollow Road in Peoria, Ill., which received $5.8 million in permanent financing. A Best Buy retail store occupies the asset, which received a 6.25-year fixed-rate recourse loan at 75 percent loan-to-value.
–4160 South Archer Avenue, Chicago, and 601 North Harlem Avenue, Oak Park, Ill. MetroGroup secured $3.4 million for the purchase of two TCF Bank branches: $1.8 million for a 2,542-square-foot property at 4160 South Archer Avenue in Chicago and $1.5 million for a 2,700-square-foot property at 601 North Harlem Avenue in Oak Park. The 10-year fixed-rate loans were a combined 47 percent loan-to-value.
–1006 East Interstate 2, McAllen, Texas. MetroGroup provided $2.5 million to a private investor to purchase this 10,050-square-foot medical office building. Seller DaVita Inc. developed the property in 2017 and DaVita Dialysis occupies the building in a sale/leaseback arrangement. The 10-year fixed-rate loan at 70 percent loan-to-value included a 25-year amortization schedule and limited recourse.

Blashaw noted the transactions represent a rising trend of California-based investors looking outside their home state for this asset class. “Cap rates have compressed and, consequently, yields have declined significantly in California, so we are increasingly seeing local credit tenant net lease investors seeking higher cap rates and yields on their investments,” he said. “This search has taken them away from their backyards into other states and sometimes secondary markets.”