LOS ANGELES—Optimus Properties and Infinity Redevelopment have secured a $22 million loan to purchase the Juanita Tate Marketplace. The borrower purchased the retail center for $24 million, making the loan-to-cost ratio for the financing 90%. The shopping center, however, is valued in the $30 million range, making the loan-to-value 76%. The loan has a 10-year fixed rate at 4.187% with two years interest-only followed by a 30-year amortization.

“There weren't a lot of lenders who were willing to do a 90% loan-to-cost,” Shahin Yazdi, an SVP at George Smith Partners, tells GlobeSt.com. “They want borrowers to have a lot more skin in the game. Finding a lender that would do the loan with just straight debt was one of the biggest challenges. Ultimately, the buyers got to buy a $24 million property by putting only $2 million down, which is very unique.” Yazdi secured the funds on behalf of the borrower.

Even the loan-to-value ratio was on the high end, according to Yazdi, who explains that anything over 75% is uncommon. “Once you go above 75%, you start to hit mezzanine, so the lender did have to make a few exceptions to go that high, but they made it happen,” he says. “Frankly, what was very uncommon was our debt yield. We were at a 7.24% debt yield, and that is not normal even in this market. Lenders get very aggressive even when they are at 7.5% on retail. To get a lender to go below that threshold was pretty amazing.”

The high LTV and LTC weren't the only challenges. The property also has a section 108 construction loan, which was funded through the city and had the city named as a second trustee. “The section 108 loan did scare off a few lenders,” says Yazdi. Still, with these challenges, Yazdi received a good amount of interest from potential lenders who were willing to fund the loan. He said that it was important to educate the lenders on the property type and the strength of the tenants, which really helped to drive interest. “At the end of the day, the asset spoke for itself with the credit of CVS and Northgate, which is not a credit tenant but is doing well. We were able to really sell banks on the fact that 75% of the center is leased by credit tenants. I believe that the lender made a really good loan and a really secure loan,” says Yazdi. “I don't think the lenders came off of any of their core fundamentals.”

The Juanita Tate Marketplace, a 77,000-square-foot shopping center in South Central Los Angeles, opened in August of last year. It was a city-funded project that was developed by City of Los Angeles and the nonprofit organization Concerned Citizens of South Los Angeles and broke ground in late 2013. With CVS and Northgate Market serving as co-anchor tenants, the property brings much needed retail options to a densely populated area of the city.