Southern California development firm Caruso secured a loan of $450 million to refinance the Americana at Brand property, one of the company’s most significant assets located in Glendale, Calif.
The company obtained a five-year commercial mortgage-backed securities (CMBS) loan for the 600,000-square-foot mall, with Morgan Stanley and Goldman Sachs facilitating the loan’s origination, according to DBRS Morningstar.
According to a report in The Real Deal, the CMBS loan carries an interest rate of 7.1 percent, approximately 2 percent higher than the federal funds rate as of July 12.
This transaction represents the firm’s first foray into CMBS financing for the mixed-use property, which opened in 2008. Morningstar revealed that nearly 90 percent of the loan will be allocated toward paying off existing debt. In addition, approximately $35 million from the loan will be used to distribute cash to equity holders.
Previously, Caruso held a $360 million senior loan from MetLife for the property, as per records filed with Los Angeles County. Based on a June 2023 appraisal, Morningstar indicated that the property is valued at $870 million, almost double the construction cost incurred by Caruso.
According to the report, Morningstar expressed its view that cash-out refinancing arrangements are considered “less favorable” due to the reduced incentive for borrowers to support a property during economic downturns when less of their own cash equity is at risk.
Over the past few months, the number of these types of financing contracts has decreased as lenders have become stricter with borrowing requirements, resulting in more expensive loans. In 2013, when Caruso secured the MetLife loan, the federal funds rate was nearly zero percent.
According to Caruso’s website, the Americana at Brand property, located at 889 Americana Way, boasts a 99 percent lease rate. The company describes the property as one of the 15 most-productive and highest-grossing retail centers in the world.
The property was also Caruso’s inaugural venture into mixed-use residential development. This project comprises 242 apartments and 100 condominiums situated above the retail spaces. It presents a unique opportunity for residents to experience a vibrant, upscale urban environment that is uncommon in Los Angeles, according to Caruso’s website.
