Nearly $36M Finances Retail Renovation

SANTA MARIA, CA-The owners of the Santa Maria Town Center plan to remodel the 364,628-sf property, bring in new tenants and add a theater complex using proceeds of a $35.9 million loan that they obtained through Carlton Advisory Services Inc. New York-based Carlton arranged the $35 million flexible floating-rate loan, reports Carlton's chairman, Howard L. Michaels. The Los Angeles office of Legg Mason Real Estate Investors Inc., which provided the financing and is a subsidiary of New York-based Legg Mason Inc., reports that the loan will refinance and recapitalize the regional mall in downtown Santa Maria. The loan was made through Legg Mason Real Estate Capital ("LMREC"), a discretionary mezzanine, bridge mortgage, and preferred equity real estate fund. Michaels says that the financing will enable the owners, private investors based in Southern California, to re-tenant space on the second floor, renovate a significant portion of the mall and build a platform for a new multiplex theater. Carlton's Marc Sznajderman represented the client and placed the financing, which is a floating rate LIBOR-based loan. Originally constructed in 1976, Santa Maria Town Center is a two-level enclosed regional mall occupied by both national and credit quality tenants and is anchored by Sears as well as the Robinsons-May and Gottschalks department stores. Michaels says that since the mall is currently only 76% occupied, the new capital provides the mall owners with "an excellent opportunity to increase occupancy and realize additional cash flow. Besides attracting a multiplex movie theater, he says, the financing will enable mall management to expand the center' food court and improve access, signage, lighting and landscaping at the property. Legg Mason notes that the center is the only regional mall between Ventura and San Jose on the California coast. Loan proceeds "will re-finance the existing first mortgage debt and fully capitalize a business plan to reposition the mall," Legg Mason says, describing the business plan as "well conceived to create significant value by upgrading and repositioning the mall." The floating rate loan represented approximately 80.1% of appraised, "as-is" value and 70.4% of stabilized value. The loan has a term of 48 months and is pre-payable without penalty after 18 months. The interest rate is 400 basis points above one-month LIBOR and is subject to a LIBOR floor. The loan is interest only for the first 24 months and amortizes thereafter.