Challenges: HRC’s assignment was to refinance a 2007 vintage CMBS loan. The sponsor wanted to maximize cash flow with as many years of interest only financing as possible. Raley’s and Ross, the two anchor tenants’, leases expire less than four years from the new loan’s origination date. The year four rollover combined with the perception of Chico as a tertiary market and the TIC ownership structure eliminated life insurance company interest in the property, despite the property’s 96%+ historical occupancy rate.

Solution: HRC arranged a ten-year conduit loan with the full ten-year term of interest only payments at a spread significantly below what most deemed to be market rate. HRC negotiated cash management to correspond with Raley’s and Ross’ renewal notice provisions. The financing allows the borrower to cash flow the asset without punitive reserve sweeps as they negotiate renewal terms with Raley’s and Ross.