Fident Capital secured $9.5MM of permanent financing for the recently constructed California Department of Motor Vehicles (DMV) located in Lancaster, California. The 5.8-acre site holds a 28,878 square foot built-to- suit office building fully leased to the State of California on a 20-year lease. Working with one of the largest finance companies in the world, Fident’s CMBS execution funded at 70% LTV and 90% LTC which repaid the existing construction loan and provided
considerable cash out to the borrower on a 10-year, fixed rate, loan term.
The advantageous long-term lease and credit tenant were not enough to mitigate all challenges of the deal. The main obstacle proved to be securing sufficient loan proceeds. All California State leases provide for outs beyond years 8 to 10. While this may be good for the State, it forces risk capital and lenders to underwrite the short (in this case) 10-year initial term rather than the entire lease. Further, while the negotiated lease rates were on par with other California DMVs and made sense given project costs and the initial lease term for this purpose-built asset, the tertiary market location provided no evidence of supportive comparable lease rates.
Our client, after a recent struggle with appraisal issues from a long-standing bank relationship, engaged Fident to mitigate these challenges. Our careful and statewide analysis of other DMV and GSA leased properties as a careful and deliberate choice of lending partner, led to a strong appraisal and optimal proceeds. While numerous CMBS providers quoted the deal, Fident tapped our nationwide network of finance professionals to further vet potential lenders’ ability to execute. Proving invaluable, this network reinforced our choice of lending partner who went on to close at the agreed upon loan amount without re-trading any of the original deal terms.