Arriba Capital (Arriba) successfully closed a $2,000,000 commercial loan to buy out a minority partner and refinance the existing hard money debt on the property. The loan was secured by a non-owner occupied industrial property in Rockford, IL. The 130,000 square foot manufacturing building was 82% occupied at time of closing.
Challenge: The current debt on the property was maturing in less than 30 days and the existing lender wasn’t willing to extend the loan. The tenant base was unique in respect to the number of tenants (43) and the short-term nature of the leases. More than half the leases expired within 12 months of the closing date. The property was originally built in the 1920’s so the age and condition of the building had to be taken into consideration as well. Lastly, the majority owner was an out of state borrower and the minority partner, whom was being bought out, managed the day-to-day operations.
Solution: Arriba identified a local community bank that understood the Rockford market and the complexities involved in this particular transaction. By emphasizing sponsorship’s ability to maintain a high occupancy level, stable historical cash flow, and ability to retain tenants, the lender was compelled to make this loan. To mitigate the lender’s concerns regarding the age of the property, Arriba structured a small maintenance reserve, which was funded into the loan. The transition of management was the final major hurdle. Arriba worked hand in hand with the sponsorship on a succession plan to make the transition as smooth as possible. The $1,945,000, 5-year loan, was priced at 5.85% and amortized over 15 years.