LOS ANGELES—Three investment partners havesecured $22 million in permanent financing loansfor five separate retail properties in the fashiondistrict of Downtown Los Angeles. The individual loans range invalue from $1.1 to $8.4 million. The identity of the borrowers andthe addresses of the properties are confidential.

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The funds from each of the loans will be used torecapitalize the assets. One of the loans was asecond trust deed mortgage cash-out with a three-year term and a4.5% interest rate. “The rate is kind of unheard of in thismarketplace,” Jonathan Hakakha, managing directorof Quantum Capital Partners, tells GlobeSt.com.“The income of the property has doubled in the last three years. Itis a 150,000 square foot building that was used bystorage, wholesale andshipping facilities, who would pay $0.30 to $0.50per foot on 20,000 to 60,000 square feet. As these tenants vacatedthe building, the landlord broke the space down into smaller spacesto rent them at a lot higher cost per square foot.”

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The remaining loans have a seven-year term with a five-year,fixed interest rate at 4%. These low rates allow the borrowers toreduce their capital costs by 210 basis points. “The challengealways in the garment district is the fact that these tenants areon short term leases, and in some cases in month-to-month leases,so we really had to demonstrate that these buildings have beenstable historically and will continue to be stable,” says Hakakha.“A lot of lenders shy away from that marketplace because of theshort-term lease roll of the buildings.” He notes that not each ofthe three investors served as a borrower on each of the fiveloans.

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The five loans were secured through three offshorelenders. Rates this low are very rare, and Hakakhaexplains that securing low rates is really a matter of finding theright lender. Still, financing activity in these downtown marketsis strong. “In 2008 to 2011, no one would touch this market becauseit was so badly hurt. As the lenders have opened up to thesemarkets, landlords are taking advantage of the financing that wasnot readily available before,” says Hakakha, who adds that theuptick is also fueled by landlords taking advantage of low interestrates, where in some cases they are able to reduce their rate by100 to 200 basis points.”

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National chain retailers are also realizing the potential of thearea, especially with the increase in multifamilyand office space. GlobeSt.com recently reported theuptick in national retailers moving to the downtownmarket, including brands like UrbanOutfitters and Zara.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.