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PHOENIX-A local developer has pulled an 11-property, class A retail portfolio off the market, opting instead to refinance it with two loans totaling $271 million. Asset owner PDG America also brought a capital partner into the 1.67-million-sf mix.

According to Patrick Dempsey, principal with the Phoenix office of Lee & Associates, the local seller had every intention of disposing of the portfolio when it was first introduced to the market in July 2006. “The seller made the decision to proceed with redevelopment of certain components of the portfolio and add value while bringing in a structured finance partner,” says Dempsey, who with Lee & Associates principals Jan Fincham and Kevin Kopp, marketed the package.

Dempsey tells GlobeSt.com that PDG America believed it made more strategic sense to keep the 90%-occupied portfolio and stabilize it rather than sell. “They’re doing very well with the centers,” he adds.

Timothy W. Storey, a principal in the Phoenix office of San Francisco-based Newmark Capital Realty Inc., says the owner’s search for portfolio financing actually began in late 2005. “We’d presented a bunch of options to the owner at that time. The interest rate environment changed a little and there were a number of people interested in buying the property,” he says. “That’s when Lee got involved. But they ultimately decided to refinance the properties instead.”

Storey says Des Moines-based Principal Commercial Funding LLC cleared a $212-million permanent loan while NorthStar Realty Finance subsidiary NRF Capital of Irving, TX funded the $59-million mezzanine piece. Original reports about the loan did not include an earn-out piece, which tacked $4 million onto the total. The permanent loan carries a 5.76% fixed-rate interest; the mezzanine debt, 10.53% fixed. Both loans are 10-year terms with interest-only payments.

“NorthStar’s main business is value-add and they do both bridge and financing,” Storey notes. “A number of the folks at NorthStar used to work for Principal so there was a connection there, too.”

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