Lender's Inroad Puts $58M Into $220M Project

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DENTON, TX-Marching into Texas with a $58.57-million financing, the La Jolla, CA-based Scripps Investments & Loans Inc. has cleared the way for the 1.3-million-sf Northlake Town Center to become reality. The lender’s first deal in the state is a 62% loan-to-value package of seed and construction capital at a blended fixed- and floating-rate interest averaging 13%.

Developer Eric Cox, president of Trophy Design & Development Associates of Tarrant County, put $5 million on the line to secure the Scripps loan, which is an interest-only vehicle with an 18-month term plus up to two years of extensions, according to David Braga, a Scripps underwriter who helped to package the deal. He tells GlobeSt.com that the $19.1 million of construction funds for the estimated $220-million retail project will be released when the developer meets preleasing or presale conditions that require signed contracts with one anchor, one major retailer and a multi-screen theater. And, the prediction is that will happen within six months of the 157.87-acre acquisition from a local family, HT Properties LLC.

Northlake Town Center is envisioned as a traditional “Main Street” with retail and restaurants in the bulk of the space alongside entertainment, a 100,000-sf hotel and 392,150 sf of office and 80,000 sf of medical office space. The development site is situated one-quarter mile north of Texas Motor Speedway at the Interstate 35W junction with FM 1171 in Denton County. There is 2,000 feet of interstate frontage.

Braga estimates it will be 12 to 18 months before the town center “really starts to go vertical,” but site work should get under way in three to six months. He says $1.62 million of the structured finance is being used to complete designs, fully engineer the site and cover transactional fees as well as costs related to the final approval process.

Braga says the developer has had significant interest from the retail industry, with a prospecting list of top national names crisscrossing all categories. But as the market knows, there is stiff competition in the I-35 corridor for every big-box name in the industry so the developer’s leasing team has challenges to overcome.

Scripps, founded in 1999 by its president Jeffrey Lubin, has been searching for a Texas inroad. “This project is just really nice,” asserts Braga, who partnered with Erich Beringer, Scripps’ senior commercial underwriter, to help close the deal. “It’s a low loan to value and we could control the use of funds based on our requirements.”

Braga says the underwriting process took roughly three weeks. He adds that the funding, coming from Scripps’ traditional banking partners, took a couple months to package with first- and second-trust deeds. Under the terms, the borrower has the option to pay off the facility with an equity restructure within the first six months or continue funding the project through the loan’s construction facility.

Braga says Scripps doesn’t have a set allocation for Texas, but definitely is scouting the metro areas for more retail projects to finance. The lender also has been funding medical office projects in California. “We’d like to do more deals in Texas like this. We’re looking for a market that hasn’t been run up like Southern California,” he explains.