CapitalSource plans to ramp up lending

Real Estate Finance and Investment

December 1, 2003

Chevy Chase, Md.-based CapitalSource Finance has originated a $17 million first mortgage loan to Ocean Walk Shoppes for its acquisition of a 110,000-square-foot specialty retail center in Daytona Beach, Fla. The loan is part of the CapitalSource's plans to originate $200 million in new real estate loans this year. The three-year-old company, which went public in August, is looking to expand and eventually hopes to originate up to $1 billion a year through its corporate finance, healthcare finance and structured finance divisions. About 50% of structured finance loans are in real estate, said Paul Wardour, marketing director.

The Ocean Walk property is anchored by a stadium theatre and is located in the city's redevelopment district. Shiraz Allidina, the investment officer who worked on the deal, said that theatre-anchored centers have fallen out of favor, which allowed the opportunistic buyer to snag the beachfront property. "The property had strong fundamentals, and the competition shied away from it, which allowed us to achieve good risk-adjusted pricing and the client's needs," he said. CapitalSource focuses on either unique properties or deals with a higher loan-to-value ratio of up to 90% of initial cost. Typically, the leverage on conduit-style loans is below 70%.

CapitalSource originates loans across the country, typically targeting existing stabilized properties, although the company also does rehab loans. Alladina said that the company does not make new construction loans, although it may consider doing so later. Typically, senior loans range from $5 million to $40 million, while mezzanine loans range from $2 million to $20 million. The amortization schedule for the Ocean Walk loan was 25 years; it varies for other deals. Alladina said that typically CapitalSource closes deals within three weeks.

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