The Deal
Commercial Lending Solutions recently closed a $17 million permanent financing package for a multi-tenant industrial flex complex in Pomona, California. The property consists of six buildings totaling 120,000 square feet, featuring a strategic mix of warehouse, light manufacturing, and showroom space that serves the diverse needs of the western Inland Empire market.
At 88% occupancy, the complex generates stable cash flow from a well-diversified tenant base. The borrower approached us seeking to refinance and consolidate three existing loans into a single, more efficient capital structure. Given Pomona's strategic location in the western Inland Empire, where industrial vacancy rates have tightened to under 3%, the property represented an attractive investment in one of Southern California's most supply-constrained industrial markets.
The Challenge
While the property's fundamentals were strong, the financing presented several complexities that required careful positioning. The diverse tenant mix, which included manufacturers, distributors, and showroom operators, created lease structures with varying terms and renewal schedules. Several tenants operated on shorter-term lease arrangements, which multiple lenders flagged as potential rollover risk in their underwriting.
Traditional portfolio lenders expressed concern about the concentration of lease expirations within a 24-month window, representing approximately 35% of the property's income. Additionally, the flex nature of the space, while operationally advantageous, required lenders to understand the adaptability and re-leasing potential of units that could serve multiple industrial uses.
The existing three-loan structure also complicated the refinancing process, as payoff coordination and timing became critical factors in execution. The borrower needed certainty of close to avoid potential gaps in financing or extension fees on the maturing debt.
The Solution
Rather than viewing the tenant diversity as a weakness, we repositioned it as a fundamental strength of the investment. Our marketing strategy emphasized that no single tenant represented more than 15% of total income, creating a naturally hedged cash flow profile that actually reduced, rather than increased, overall property risk.
We highlighted the flex configuration as a competitive advantage in the tight Inland Empire market. The ability to reconfigure units for warehouse, manufacturing, or showroom use provides landlords with multiple leasing strategies and appeals to the broadest possible tenant base. This flexibility has proven particularly valuable as industrial users adapt their space requirements in response to evolving supply chain strategies.
Our capital markets approach focused on CMBS conduits and life companies that could appreciate the property's diversification benefits and stable market fundamentals. We prepared detailed market analysis showing Pomona's strategic position as a lower-cost alternative to Los Angeles County industrial space, while maintaining excellent transportation access via multiple freeways and proximity to major distribution hubs.
The Outcome
A national CMBS conduit recognized the strength of our positioning and provided highly competitive terms that exceeded the borrower's expectations. The final structure included 70% loan-to-value financing at a 10-year fixed rate with 30-year amortization, providing substantial cash flow relief compared to the previous shorter-amortization debt.
Critically, the conduit offered non-recourse terms, eliminating personal guarantees and providing the borrower with optimal liability protection. The lender's underwriting ultimately viewed the tenant diversity as a credit positive, noting that the property's lease rollover schedule actually provides opportunities for rent growth in a rapidly appreciating market.
The transaction closed within 45 days of application, allowing the borrower to capture favorable interest rate conditions and avoid extension fees on the maturing loans. The consolidated debt structure simplified property management and created a foundation for the borrower's continued expansion in the Inland Empire industrial market.
This financing demonstrates the importance of strategic positioning in commercial real estate capital markets. Properties with unique characteristics require lenders who understand their operational advantages rather than focusing solely on perceived complexities. The success of this transaction reflects both the strength of the western Inland Empire industrial fundamentals and the value of matching sophisticated properties with appropriate capital sources.
Trevor Damyan is a principal at Commercial Lending Solutions in Los Angeles, specializing in complex commercial real estate financing throughout California. He can be reached through clscre.com.