$3.2M Loan Jumpstarts Lender's Texas Entry

Eric H. Better, director in the Los Angeles office for Burlingame, CA-based Barry S. Slatt Mortgage Co., bundled the terms for the near $3.2-million refinancing of the 55,815-sf Cross Creek Shopping Center in Plano and then picked up the extra business around town in what has evolved into a push for a piece of the market.

Better tells GlobeSt.com that the owner of the 91%-leased center at 901 and 909 W. Spring Creek Parkway got a 10-year loan, with 25-year amortization, at a 5.35% fixed interest rate from Boston-based CW Capital. "It's the lowest rate I've seen from a conduit lender in 30-plus years," he says of the closed deal with a 61% loan-to-value ratio.

The borrower of record is Rose Creek LP, but the name behind the name is FPN Real Estate Corp., which does business as Parkford Properties/Encino Management Co. Led by Frank and Philip Pounazarian, the Encino, CA-based real estate syndicate has an 18-center retail portfolio with about one million sf. Better's relationship with the group has spawned a half dozen more retail transactions in Dallas and the number is likely to grow to 25 in the next 60 days.

Better says CW Capital funded the deal even though the center has a 41% lease turnover in 2004. A creative financing package set aside $150,000 in a reserve account "that convinced the conduit to go along with the deal," he says. The package also included a cap on a required $250,000 of capital improvements. Better says the cap was accomplished by teaming the two highest years of the loan term to work up a reserve amount, to be funded in installments, at "a fraction of what was recommended by the engineer and required by the conduit."

Better says capital availability has conduits bending to lend. "For a conduit to customize and bend at that level is phenomenal," he says. Now, he's working to get his conduit lenders "comfortable with Dallas."

Pounazarian, through the Parkford Properties real estate syndicate, acquired Cross Creek in November 1991 for $1.6 million, but Better pegs today's value at more like $5.2 million. He says the new debt replaces a $1.9-million balance of the original financing for the two single-story retail buildings on about 5.2 acres at the intersection of West Spring Creek Parkway and Alma Road and delivers close to $1.3 million in equity for the investment group.