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Sacramento was hit hard by the housing downturn and full-fledged recovery still remains somewhat elusive. The $11.5M in mini-perm debt refinancing of one retail and two office properties could be an indication that capital is again starting to flow into the city’s distressed assets.
The 136,197 SF portfolio contains a stabilized retail asset and two highly distressed and empty office buildings. Continental Funding, the real estate investment bank that managed the process, was able to increase the blended occupancy rate of the entire portfolio by pooling the good with the distressed.
Continental EVP J.M. Grimaldi says structuring the portfolio this way achieved a total loan-to-value (LTV) ratio of 65%. A high LTV ratio implies a higher risk of default.
Additionally, Continental cross-collateralized and pooled the assets into one loan. This, according to Grimaldi, allowed the project to be priced as a mini-perm loan rather than a more expensive bridge loan. A mini-perm is short-term financing payable in three to five years typically used by developers until a longer-term source of funds can be found.
It remains to be seen if this deal heralds a new turn in the ongoing saga of Sacramento’s distressed asset market.
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