LOS ANGELES-Continental Development Corp. has reduced its borrowing costs significantly in a $52-million refinancing of four buildings at its 2.7-million-sf Continental Park mixed-use development, according to locally based Sonnenblick-Eichner Co. The new loan cuts the debt service despite defeasance costs associated with the refinancing, according to principal David Sonnenblick of Sonnenblick-Eichner.
Sonnenblick says that the former loan carried "a significant defeasance premium," but the premium was more than offset by the equity realized from the refinancing and the savings in debt service payments.
The $52-million financing included two separate mortgages, one for $35 million for three buildings at 1700 Rosecrans Ave. and the other a $17-million mortgage for 2200/2250 Park Place.
The 1700 Rosecrans buildings are 100% leased to Northrop Grumman, Office Depot and Warner Bros. The Park Place property is a 100,000-sf health club that is 100% leased to Spectrum Club South Bay, which is also the training facility for the NBA's Los Angeles Clippers.
The deal required "negotiating around short term lease maturities and the special-use nature of the health club," Sonnenblick notes. The loans were priced at a spread of less than 100 basis points over the 10-year Treasury, equating to an all-in rate of approximately 5.5%.
Both 10-year financings were provided by a Wall Street investment bank and include a period of interest only payments followed by a 30-year amortization schedule.
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