CREJ - page 16

Page 16 —
— August 19-September 1, 2015
by John Rebchook
It’s a great time to refinance a
retail project.
If you don’t believe it, just ask
Michael J. Salzman.
Salzman, a vice president of
loan production at the Essex
Financial Group in the first half
of the year, refinanced more than
$100 million in debt on about a
half-dozen retail projects.
Together, they have about
750,000 square feet. They range
in size from 42,000 sf to 310,000
sf. The properties were 10 to 20
years old.
Most of them were along the
southeast corridor or in the
southwest part of the metro area.
anchored centers, power centers
and neighborhood centers.
One, a power center in Lit-
tleton, has a grocery-anchored
component. One center was in
“The majority, over 90 percent,
were local,” Salzman said.
More than half of the loans
were made by life insurance
companies and the others were
commercial mortgage-backed
securities loans.
A lot of 10-year, CMBS loans
were made by Wall Street in 2005
and 2006, before the financial
meltdown occurred, Salzman
“2005 and 2006 and even 2007
were big years for debt origina-
tion and we all know what hap-
pened after that,” Salzman said.
Owners who were able to hold
on to their properties during the
Great Recession couldn’t ask for
a better time to refinance, con-
sidering how low rates are today.
Salzman refinanced the prop-
erties from “the high 3 percent
range to the mid-4s,” he said.
That was below the initial rates.
The rates range from the high 3
percent range to mid-4.5 percent.
“The rates they locked in from
2005 to 2007 were certainly high-
er,” Salzman said.
He said many of today’s retail
property owners would rather
refinance their properties than
sell them.
It is especially difficult to find
other properties in 1031 exchang-
es in order to defer capital gain
taxes on the sale, he noted.
“Of course, it really depends
on the long-term strategy for the
asset and the borrower holding
period,” Salz-
man said.
Howeve r,
he said that
owners may
want to sell
the asset at
some point,
the interest
rate is not the
only consider-
“Part of the consideration is the
prepay structure,” Salzman said.
“A lot of borrowers want the
prepay flexibility,” in order to
avoid paying a penalty if they do
decide to sell, he said.
That is especially important for
value-add investors that are buy-
ing older retail properties with
the idea of renovating them, sta-
bilizing the rents and tenants and
then selling the properties, he
Adecade ago, whenWall Street
financed many retail deals with
CMBS loans, many borrowers
were unhappy with the service
they received from them.
Essex, he noted, now offers ser-
vicing of loans.
“That is one-stop shopping for
borrowers,” Salzman said.
“Essex currently is servicing $4
billion in loans,” he said. Most of
it is currently for life insurance
loans, but increasingly it also is
servicing CMBS loans, he said.
Essex and other companies pro-
vide servicing both for loans that
they place, as well as third-party
Salzman does not see any slow-
ing of lender interest in retail
properties in the Denver area.
“Lenders are being very
aggressive right now,” Salzman
“They have plenty of money to
lend,” he said.
At the same time, lenders are
not just throwingmoney at deals,
the way they were before the
financial meltdown.
“They are being very judicious
about the deals they are doing,”
Salzman said.
For example, if the loan rep-
resents a large amount per sf, it
must be justified.
Lenders also look at rent rolls
Lenders tend to like it when
current tenants have a number of
years left on their leases, because
that provides a stable cash flow,
he said.
However, at the same time,
owners have an opportunity to
replace existing tenants with ten-
ants that will pay more rent, he
“It’s a double-edged sword,”
Salzman said. “There is an
opportunity there, but lenders
don’t like the uncertainty from a
big rollover risk.”
Part of his job in those cases
is to provide information on the
impact of tenants leaving.
“We will really dig in and
explain the market to lenders so
they understand who the likely
replacement tenants will be and
what the potential new lease
rates will be,” Salzman said.
Other News
Dale Stewart
a vice president and
investment analyst, respectively,
of the Denver office of
Marq Capital,
arranged $3.3 mil-
lion in permanent financing for
the Saddle Rock Self-Storage at
6950 S. Gartrell Road in Aurora.
Constructed in 2012, the facility
has 400 self-storage units con-
tained in 10 buildings.
Stewart andLindgrenarranged
the financing for the borrower
through NorthMarq’s corre-
spondent relationship with a life
insurance company.
Michael J. Salzman
‘Lenders are
being very
right now.
They have
plenty of
money to
– Michael J. Salzman,
Essex Financial Group
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