Fident Capital secured $14.5MM of permanent debt in a cash-out refinance of a 190,000 SF industrial park in Visalia, CA. The borrower, a repeat Fident client, is a San Diego-based investor/developer with holdings across the Southwest. The debt was sourced from a regional bank that provided a 7-year fixed-rate term at 65% leverage. The financing paid off the acquisition bridge debt and repatriated over 100% of the borrower’s equity used to acquire the site and develop an additional building on the property. Most importantly, the borrower was able to rate lock at sub-5% pricing early in the process, enjoying significant shelter from the rapidly escalating interest rate environment.
The primary challenge of the financing was the fact that the asset that was not fully leased at the time Fident went to market. Some lenders hesitated to offer terms because the property was not operating at capacity, or due to a lack of seasoning. Many lenders, and particularly life companies, viewed the financing as less desirable due to the asset’s smaller size and shorter-term leases. Despite these headwinds, Fident secured quotes from 13 lenders, which created a sufficiently competitive environment and helped to sharpen the winning terms in the final offer.
The tertiary location in the Central Valley of California provided an additional challenge to the deal. Fident’s market research showcased Visalia’s attractiveness as a burgeoning industrial hub. Recent legislation limits truck drivers time at the wheel, making the haul from areas north of Visalia into key Arizona markets a two-day drive. Fident’s marketing message highlighted this shift in demand and the strong fundamentals of the market, including 3.8% vacancy and 9.3% year-over-year rental rate growth as of Q2 2022. Fident was also able to decipher the project’s complex industrial leases – each of which with its own unique structure – to present the information in a digestible format for lenders.
Top-flight sponsorship, the remarkable operating performance of the subject property itself, and the strong fundamentals of the Visalia industrial market provided for abundant financing choices. Fident exceeded the client’s expectations by securing $2MM more loan proceeds than the client’s original ask.
