SAN DIEGO, Calif. – MetroGroup Realty Finance, a private commercial mortgage banking firm based in Newport Beach, California, recently arranged $18.5 million in financing on behalf of a private investor for an unanchored retail center totaling 56,173 square feet in northern San Diego, California.
“Utilizing the strong, long-term relationships we’ve established within our network of lenders, we secured ideal financing terms that met the specific needs of our client,” says J.D. Blashaw, Vice President at MetroGroup. “Our client developed the property in two phases in 2002 and 2013 with each phase having its own distinct financing. The loan on one phase was maturing with the other loan having a future maturity and early prepayment penalty. In a rising interest rate environment, we advised the client to combine the two loans into one refinance to lock in a long term 10-year fixed rate, lower the overall interest rate expense, and convert a portion of the property’s appreciated equity to liquidity.”
According to Blashaw, San Diego has continued to see a high demand for well-located industrial and retail center properties. During the pandemic, the retail sector experienced one of the most challenging disruptions of all commercial real estate asset classes.
“This project is a well-conceived and well-located retail center that experienced minimal disruption and no tenant vacancies during the pandemic, despite the onerous local health mandates that shuttered certain tenants for months,” notes Blashaw.
Today, retail has regained investor interest as businesses resume normal operations and are further bolstered by online sales. This strong interest in retail centers has spurred current owners to refinance their existing loans before the Federal Reserve Bank enacts additional interest hikes this year.
“Over the past two years, retail has bounced back much stronger than anyone expected – particularly grocery-anchored retail that adopted e-commerce services, which is expected to grow more than 20% this year and double by 2025,” says Blashaw. “This growth has led to 90 to 95 percent occupancies for daily-needs retail centers.”
MetroGroup Vice President Ivan Kustic adds that businesses have seen in-person sales jump due to customer demand that was pent-up during the pandemic and as consumers and retail stores become more adept at navigating health challenges, the need for retail space, particularly in unanchored centers, will continue to grow.
“Unanchored retail centers offer investors a more stable asset within their portfolios,” says Kustic. “Mom-and-pop shops that are located in unanchored retail centers are more likely to remain open instead of closing altogether or changing their business operations to online sales only.”
The nonrecourse loan secured by MetroGroup for the San Diego-based retail center was successfully closed within 60 days of application and features a maximum loan-to-value of 60%, fixed for 10 years with 30-year amortization.
The property includes a tenant mix of service and health-and-fitness businesses; fast casual restaurants, including a major national fast-food chain; and a service station with a car wash.
About MetroGroup Realty Finance
Founded in 1983, MetroGroup Realty Finance is a private, Newport Beach-based mortgage banking company that specializes in providing capital advisory and mortgage banking services for properties throughout the United States. With deep experience across a variety of property types including office, retail, industrial, multi-family, mixed-use, hotel/lodging, and land, MetroGroup has established long-term relationships with well-respected capital sources, through which the firm delivers lasting results to its clients.