$10,500,000 Net Lease Drug Store in Woodland Hills, CA

The Deal

Our client approached us with a $10.5 million acquisition financing need for a single-tenant drug store in Woodland Hills, California. The property featured a national pharmacy chain tenant operating under an absolute triple net lease structure with 12 years remaining on the primary term. The borrower, a sophisticated real estate investor, was executing this acquisition as part of a 1031 like-kind exchange following the sale of multiple properties in their portfolio.

The fundamentals were solid: strong tenant credit, long-term lease commitment, and prime Southern California location. The borrower sought permanent financing at 65% loan-to-value with a preference for fixed-rate debt to match their hold strategy.

The Challenge

The primary obstacle was time compression. The borrower faced a hard 180-day identification deadline under Section 1031 exchange rules, and they had already consumed significant time identifying replacement properties and negotiating purchase terms. With only 35 days remaining until their required closing date, conventional financing channels were effectively unavailable.

Most institutional lenders operate on timelines that directly conflicted with the exchange requirements. National life companies typically require 75 to 90 days for net lease transactions, even with clean credit tenants. CMBS execution generally demands 60 to 75 days minimum, particularly for sub-$15 million loan amounts that require portfolio aggregation. Local and regional banks often move faster on owner-occupied properties but traditionally show less appetite for long-term fixed-rate financing on investment properties.

The borrower faced a binary outcome: secure financing within 35 days or forfeit their 1031 exchange benefits, triggering substantial capital gains taxation on their property sale proceeds.

The Solution

We immediately focused on lenders with established net lease programs and demonstrated rapid execution capabilities. After reviewing our database, we identified a regional bank that had recently expanded their commercial real estate lending platform with specific focus on single-tenant net lease properties.

This lender offered several competitive advantages for time-sensitive transactions. Their net lease program featured streamlined underwriting focused primarily on tenant credit quality and lease structure rather than extensive property-level analysis. They maintained decision-making authority locally rather than requiring committee approvals at distant headquarters. Most importantly, they had demonstrated ability to close transactions in 30 days or less.

The trade-off was pricing. The regional bank's rate was approximately 15 basis points above prevailing life company execution for similar credit and structure. However, this premium was modest compared to the tax consequences of missing the exchange deadline.

We structured the financing as a seven-year fixed rate loan with 25-year amortization schedule. The 65% loan-to-value ratio provided the borrower with adequate leverage while satisfying the lender's risk parameters for single-tenant retail properties.

The Outcome

The regional bank issued a commitment letter within 10 days of receiving the complete application package. Their due diligence process focused primarily on lease documentation, tenant financial statements, and title matters, avoiding lengthy property inspections and third-party reports that typically extend closing timelines.

We closed the transaction in 28 days, providing the borrower with seven days of cushion ahead of their exchange deadline. The final loan terms included the seven-year fixed rate at 65% LTV with 25-year amortization, meeting the borrower's leverage and cash flow objectives.

The borrower successfully completed their 1031 exchange, deferring substantial capital gains taxes that would have exceeded the modest rate premium by a significant margin. The financing structure provided stable, long-term debt service that aligned with the remaining lease term and the borrower's investment horizon.

This transaction demonstrates the importance of matching financing sources to deal-specific constraints rather than optimizing purely for rate and terms. The 15 basis point rate premium was negligible compared to the tax benefits preserved through successful exchange completion. Speed and certainty of execution proved more valuable than incremental cost savings from slower-moving institutional lenders.

The regional bank's net lease program has since become a reliable resource for similar time-sensitive transactions, particularly for borrowers facing 1031 exchange deadlines or other compressed closing requirements where traditional institutional financing timelines are prohibitive.