Case study - Retail bridge financing
A private real estate investor approached C.A. Bancorp Realty Finance seeking interim mortgage financing to assist in the acquisition of a freestanding retail building located within the City of Toronto. The subject property was fully leased to a national tenant with the investor seeking to acquire the property as a long term hold.
The investor recognized that the existing tenant’s rent was significantly lower than similar retail leases in the immediate marketplace and foresaw increased revenue potential upon expiry of the existing term of the lease. With the tenant’s lease term set to expire within 18 months, the borrower was seeking bridge financing to support his overall business strategy of re-tenanting the building to appropriate market levels. Further supporting the borrower’s strategy, while providing a clear exit strategy for C.A. Bancorp Realty Finance was an offer to lease from another national tenant at a significantly higher rent.
The borrower is a successful and experienced real estate investor with strong institutional relationships. Institutional term financing was unavailable due to the short remaining lease term, while he was unable to obtain an interim institutional financing as no construction was involved.
To assist the borrower in acquiring the property, C.A.B. Realty Finance L.P. provided an interim mortgage, representing 80% of the purchase price, for a term of 18 months. The loan was fully secured by the underlying real property along with full corporate and personal guarantees. Upon re-tenanting of the building, it is expected that a long term mortgage will be arranged with a financial institution which will be utilized to pay out the C.A. Bancorp Realty Finance facility.