Thorofare Capital has recently financed a $2,362,000 acquisition loan for a 42,462 square foot Walgreens’ anchored shopping center located in Vallejo, California. The borrower acquired the property at auction from special servicer C-III. The property has 14 tenant spaces, one of which is a stand-alone building (a vacant 5,500 square foot Hollywood Video). Historically, the property produced NOI of $450,000 until the prior owner lost Hollywood Video as a tenant in 2010 due to that tenant’s bankruptcy. At that point the owner had leveraged the property with $8.1 million of debt and was never able to agree with the lender/special servicer on a plan to re-stabilize the center. The special servicer subsequently foreclosed and has sold the property.

At the time of closing, the property was 65% occupied and produced a debt yield in excess of 10%. Eight tenants occupy the space, with Walgreens occupying 31.9% of the total space and the next largest tenant being Round Table Pizza at 10.0% of the total space. The former Hollywood Video (13% of total space) is a standalone building with attractive street frontage. By re-leasing this one building, occupancy would return to 78%. This REO acquisition opportunity presents the opportunity for the sponsor to capitalize on the potential of revenue growth and value enhancement through capital improvements and leasing.

There are no lease maturities during the loan term (even during the one potential 6-month loan extension) as C-III negotiated lease extensions for all the spaces except for Walgreens. Walgreens (Baa1/BBB) cannot vacate until November 2016 (with six-months’ notice required to exercise that lease cancelation right). One lease for 2.3% of the total space will mature in August 2017 and the rest of the occupied space does not have a lease maturity until at least May 2018.