NNN Leases Help Secure Portfolio Financing

LOS ANGELES-A locally based investor has acquired a portfolio of five NNN-leased Goodyear and Just Tires stores in the Southeast despite a lack of operating history at two of the newly built locations and other challenges, according to Century City-based Verona Capital Markets, which arranged the $7.6 million acquisition loan for the portfolio. Edward Kim, VCM principal, points out that the financing presented a number of challenges, among them “the non-investment grade nature of the tenant, specialty use nature of the collateral, above market rents and lack of operating history for two of the stores that were newly constructed.”

Kim, who arranged the financing along with VCM Associate Michael Weiner, reports that the locally based high-net-worth investor acquired the portfolio in connection with a 1031 exchange. Verona obtained the financing from a private mortgage fund based on the East Coast, arranging a non-recourse, fixed-rate loan with 30 year amortization, which represented approximately 63% of the acquisition cost.

Kim notes that VCM was able to mitigate the lender’s concerns by highlighting Goodyear’s long-term, corporate, NNN leases—none of which are scheduled to expire during the loan term—as well as the borrower’s equity in the transaction and the fact that each property was built to suit for the tenant. In addition, each of the properties is located along a major retail corridor with high traffic counts and is surrounded by an affluent customer base, Kim adds.

The portfolio financing is the latest in a number of closings and assignments for VCM, which also represents financial institutions in connection with the disposition of performing and non-performing notes and REO. As reported on GlobeSt.com, Verona recently landed an assignment to market a $68 million portfolio of 22 performing and non-performing loans, plus three REO properties, on behalf of a national bank.