Our client needed to close a solid acquisition quickly and because he had borrowed from Freedom twice before he was confident that Freedom would give him a quick decision and execute swiftly. This is an example where relationships matter.
The borrower was acquiring a leased single tenant 333K sf industrial building in South Dakota. Although fully leased, the tenant has the right to terminate its lease every year on December 31. If terminated, the tenant would pay rent for 12 months while it vacated. Financing a single tenant building in a small market that effectively has a one-year lease is not easy. However, Freedom was able to structure a solution for our client’s needs.
Freedom did its due diligence and found that there were at least six parties interested in the building should the sale fall through, or the tenant terminate. Based on our experience with the sponsor and this information we issued a LOI for a 65% of cost loan. Once the LOI was executed we visited the site, spoke to local specialist, and got comfortable that the building was highly desired. We confirmed that there was sufficient demand that should it become vacant, the year notice couple with another year of reserves that the client negotiated with the seller and assigned to Freedom would give the borrower sufficient runway to backfill the building if necessary.
Ultimately, the borrower will put the building in a multi property CMBS loan. This will allow a long term loan to be obtained even if the tenant terminates because the total cash flow of the pooled properties will be sufficient for a long term replacement loan to fund.