Inland Mortgage Capital (IMC) recently originated an $8,700,000 first mortgage loan on a 43,000 square foot retail center in suburban Dallas. The loan was utilized to fund the acquisition and repositioning of the existing center, as well as the future ground-up development of two pad sites. IMC was pleased to finance another transaction with a repeat customer.
The center was approximately 75% occupied at closing, consisting of numerous tenants with pending lease maturities, and a few that were delinquent. In addition, several items of deferred maintenance were evident. It was believed that the Seller was from outside of the United States and was unwilling to invest any money into leasing or property management resulting in an underperforming center at loan closing.
The Borrower felt that there was significant upside in the pad development and believed that the existing tenancy could be improved at higher market rents. The property is located at a significant hard corner with exceptional daily traffic counts. Further, the booming Dallas economy had been felt in the suburb, where approximately 1,000 new apartment units had been recently developed down the street. Additionally, new retail developments were being constructed in the vicinity with near 100% occupancy at much higher rents.
Subsequent to closing, the borrower was able to quickly renew three of the existing tenants at higher rents and is working on several leasing proposals for the pad sites.
IMC effectively had to create two distinct structures: (1) for the existing retail improvements which required capital improvement work and leasing costs and (2) capital for the ground-up construction for which the Borrower would likely need interest reserves to help fund the debt service during the construction period. Due to the significant future funding component, the loan was especially advantageous for the Borrower in that no interest is charged on the future advances until they are disbursed.