The Deal
Commercial Lending Solutions arranged a $15.8M permanent loan for a community shopping center in Dallas, TX. The property featured a national grocery operator or major power center anchor as the primary credit tenant, with a long-term lease driving strong foot traffic to the inline and outparcel tenants. The anchor had consistently exceeded sales thresholds in its lease, and the in-line tenant occupancy averaged above 92% over the prior 36 months. The borrower was seeking to refinance and access equity while locking in long-term fixed-rate institutional debt.
The Challenge
The anchor lease contained a co-tenancy provision that allowed the grocer or anchor to seek rent reduction if occupancy at the center fell below a specified threshold. While the center was well above that threshold and had been for years, many lenders treated co-tenancy clauses as significant underwriting risk requiring additional reserves or LTV reductions. Some lenders who were unfamiliar with grocery-anchored or power center co-tenancy structures were pricing the risk conservatively in ways that did not reflect the property's actual lease performance and historical occupancy stability.
The Solution
Trevor Damyan at Commercial Lending Solutions identified a CMBS conduit lender and a life insurance company lender, both with dedicated grocery-anchored and power center underwriting teams familiar with co-tenancy provisions in major retail leases. The selected lender structured the loan at 60% LTV with a 10-year fixed rate, having reviewed the co-tenancy trigger thresholds and determined that the current and historical occupancy provided substantial cushion above any contractual reduction threshold. No additional reserves or LTV haircuts were applied for the co-tenancy provision given the property's documented performance.
The Outcome
The financing closed at excellent terms reflecting the anchor tenant's national credit quality and the center's strong occupancy history. The long-term fixed rate provided 10 years of interest rate certainty, eliminating the refinancing exposure the borrower had been carrying under shorter-term floating rate debt. Cash-out proceeds were used to fund deferred capital improvements that further enhanced the center's competitiveness and tenant satisfaction scores. The transaction confirmed that accessing lenders with genuine retail sector expertise consistently produces better outcomes than working through generalist lenders who apply retail-sector discounts indiscriminately across property types and quality tiers.