Dealmaker: MetroGroup Secures $19M for San Diego Retail Center
MetroGroup Realty Finance, Newport Beach, Calif., arranged $18.5 million in financing for an unanchored retail center totaling 56,175 square feet in northern San Diego.
“Our client developed the property in two phases in 2002 and 2013 with each phase having its own distinct financing,” said J.D. Blashaw, Vice President at MetroGroup. “The loan on one phase was maturing with the other loan having a future maturity and early prepayment penalty. In a rising interest rate environment, we advised the client to combine the two loans into one refinance to lock in a long term 10-year fixed rate, lower the overall interest rate expense and convert a portion of the property’s appreciated equity to liquidity.”
Blashaw noted San Diego continues to see high demand for well-located industrial and retail center properties. During the pandemic, the retail sector experienced one of the most challenging disruptions of all commercial real estate asset classes.
“This project is a well-conceived and well-located retail center that experienced minimal disruption and no tenant vacancies during the pandemic, despite the onerous local health mandates that shuttered certain tenants for months,” Blashaw said.
The retail sector has regained investor interest as businesses resume normal operations. This interest in retail centers has spurred current owners to refinance their existing loans before the Federal Reserve Bank enacts additional interest hikes this year.
“Over the past two years, retail has bounced back much stronger than anyone expected–particularly grocery-anchored retail that adopted e-commerce services, which is expected to grow more than 20 percent this year and double by 2025,” Blashaw said, noting this growth has led to “90 to 95 percent occupancies for daily-needs retail centers.”
MetroGroup Vice President Ivan Kustic said businesses have seen in-person sales jump due to customer demand that had been pent up during the pandemic.
“Unanchored retail centers offer investors a more stable asset within their portfolios,” Kustic said. “Mom-and-pop shops that are located in unanchored retail centers are more likely to remain open instead of closing altogether or changing their business operations to online sales only.”
The nonrecourse loan closed within 60 days of application at a maximum 60 percent loan-to-value ratio, fixed for 10 years with 30-year amortization.