The Strategy for both Banks was to finance an increase in the size of the subject retail power center, from 277,163 to an approximate 282,889 SF. The entire project encompassed approximately 49.898 net acres of land. The project is located on the Northwest side of Indianapolis, at approximately I-465 and West 86th Street. The proposal included provisions for two credit facilities: Facility A provided a construction draw note of $40,000,000, which was to facilitate construction of the subject property. Facility B would serve as an interim term note for up to $40,000,000 which was to provide a short term take-out option after the project was built, leased, stabilized and has met the conversion option test: When Borrower secured Tenants of at least 92% of the net leasable space, the Facility A – Draw Note was converted to the Facility B – Term Note option; this was subject to the completion of construction, leasing and occupancy of the buildings, and execution of the required land leases. The project was required to have an NOI (inclusive of out-lot income) that provided a minimum DSCR of 1.25x, using the greater of the then current prevailing interest rates in the permanent loan market: the current 10 year T-Bill at the time of conversion plus 200 bp’s, or the current HNB interest rate on the project. All DSCR tests were to be based upon a 30-year amortization.
Both banks approved the subject facilities, based on the experience and knowledge of the owners within the industry, the projected ability of the project to cash flow upon stabilization, ability of this project to cash flow into Kite’s current global cash flow, acceptable collateral, wellknown regional and national retail tenants, 55% of retail project being pre-leased and the remaining 45% having letters of intent. One of the pre-lease tenants (Bed Bath & Beyond) and two of the LOI tenants (Smokey Bones and Macaroni Grill), were investment grade, allowing limited personal guarantees of the majority of the owners, with the aid of strong regional and national economic conditions for this type of product. With loan commitments in hand in March 2004, the Developer was able to successfully complete the development, leasing and tenant build-out. Shortly after the original approval Galyan’s was sold to Dick’s Sporting Goods, and proved to be an acceptable replacement tenant. The Retail Center is currently still operating successfully for Kite Realty, and was a successful transaction for both banks.