Financing a shopping center depends largely on the type of tenants housed within it. They are distinguished as either anchored or unanchored. Financing Products »
Anchored Shopping Centers are those that have a traffic generating business as a major tenant. Traffic generators are well known retail establishments like major supermarket chains or stores such as Old Navy, Dillards or Nordstrom. They “anchor” the center by attracting shoppers to the location.
Many anchors are credit tenants, meaning their national credit rating exceeds a certain minimum. Credit tenants add financial strength to the loan as payment of rent is more likely from a tenant with substantial financial backing.
Because of the lower risk and credit standing, interest rates on loans made to Anchored Shopping Centers are lower. Most borrowers prefer the ten-year term loan amortized over a long period of time, and these loans are usually priced at a markup over the ten-year treasury note. Anchored Shopping Center lenders usually do not charge a fee.
These can be large or small. What they have in common is a lack of traffic generators or anchor tenants. Some centers called Dark Centers used to have an anchor tenant, but the tenant vacated the space. Most unanchored centers are Neighborhood Centers that serve the retail needs of a limited area. In recent years, the Convenience Center has also become popular, combining the convenience market with fuel and popular establishments such as cleaners and take-out food.
Interest rates for these centers, while consistently greater than those with anchors, are aggressive if the income is stabilized with long-term leases or substantially inhabited by businesses owned by the principal. Dark Centers are the most difficult to finance even if the anchor tenant is still paying rent. Investors know the lack of the anchor hurts the business of the other tenants, and the current income from the space does not offset the risk that other tenants will leave at the earliest possible opportunity.
The loan-to-value for a Convenience Center is usually higher than one achieved for a Neighborhood Center . Many Convenience Centers are substantially owner-occupied and thus qualify for different underwriting standards with some investors. Loans for unanchored centers can be non-recourse to the borrower. The best rates are based on a ten-year loan amortized over a twenty-five year period.
|
HOW EQUINET WORKS
