Commercial Development
Grocery and Drug Store Anchored Center
Transaction Type: Restructuring
Industry: Real Estate
Location: Southeast United States
Client: Developer
Role: Project Financial Advisor
Cascade’s client is a large regional developer of grocery anchored and drug store anchored retail centers. Publix and Walgreens are its two most prominent clients. The developer had approximately 80 different development projects underway which were at all stages of development: raw land that had been assembled and was being entitled, to nearly complete retail developments, to complete developments that were occupied or partially occupied. The client in mid-2008 engaged Cascade after the credit contraction started.
As a merchant developer, our client was dependent upon the orderly sale of completed properties to individual or institutional investors. As the credit markets collapsed, the market for any retail project disappeared and required rates of returns skyrocketed for the limited number of properties that did sell.
These 80 different projects had been financed by over 13 separate senior lenders totaling over $500,000,000 in debt, and additionally had an overlay at the corporate level of a $100,000,000 mezzanine facility which was provided by the mezzanine lending arm of one of the senior lenders. These lenders had interests in various development projects, some of which were cross-collateralized, some of which were guaranteed by the principals, and all had various covenants within their loan facilities.
Faced with a very complex borrowing scenario, deteriorating markets for the sale of the properties, and a slow leasing environment for the completed centers, the client faced a dire situation. Cascade was engaged to provide the detailed project-by-project assessment of the strategic and financial options, as well as the overall company evaluation. By providing a transparent and thorough analysis to all parties, a stabilizing and orderly development and sales and/or investment plan was devised. After 6 months of analysis and negotiations, a complete restructuring plan was completed for the client on an out-of-court basis and is currently being implemented.