Deal of the Week: Lot in Beverly Hills

The 14,878-s.f. lot is located on a prominent corner of the iconic Rodeo Drive in the heart of the Beverly Hills luxury shopping district known as The Golden Triangle.

Property Type: Fee Simple Ground Parcel in Beverly Hills, Calif.

Loan: $38M Permanent Loan  

Lender: Lincoln Financial Group   

Leverage: ~25% LTV

Rate: Fixed well inside of 3%

The fee simple parcel is subject to a long-term ground lease with improvements consisting of a 18,380-s.f. high-street retail structure that was not part of the loan. The biggest hurdle was the high price-per-square-foot from a rent and value standpoint and the fact that this deal was extremely hard to comp out since there are not a lot of trades in Beverly Hills, especially on Rodeo Drive.

“Lease comps are hard to find since groups hold that information close to the vest,” said Andy Bratt, principal at Gantry. “Working through the comps and how to value this property was a hurdle, plus most sales include improvements but this is just a parcel and a lot of lenders do not want to lend on ground leases.”

Lincoln Financial Group liked the extremely low leverage and the location on one of the most iconic streets in the world, especially for high-street retail. This is a highly sought-after market with a lot of the biggest retailers and the fact that you have a low-leverage loan on fee simple deal made the lender feel safe, noted Bratt.

“They liked the value of the dirt and the huge value per square foot,” he added.

There are not a lot of opportunities to lend on income real estate in this location.

The borrower is a private generational real estate family with years of experience in the market and has owned the property a long time. Gantry was able to arrange a forward-rate lock to accommodate prepayment flexibility for estate planning purposes.

Lincoln Financial provided a fully amortizing 18-year non-recourse loan. The loan will be used to retire outstanding debt on the property with minimal cash out. The borrower’s focus is to pay off this loan as soon as possible and hold the asset free and clear.