2.03.06
AMC Delancey Taps Credit Suisse For Unique CMBS Loan

Commercial Mortgage Insight
By: Nicole Kotsianas

AMC Delancey Group has tapped Credit Suisse for a 10-year, $43 million loan to refinance a construction loan on Gettysburg Village Factory Stores, a lifestyle center in Gettysburg, Pa. The loan, which is expected to be included in an upcoming commercial mortgage-backed securities deal, is unique in that it is a conduit loan with construction loan features. Typically, the company would have to go to a balance sheet lender for a similar loan, said Ken Balin, president.

The company is adding a 10-screen movie theater and 200,000 square feet of retail space to expand its presence as the most prominent lifestyle center in the region, Balin said. It wanted to obtain CMBS financing for its competitive pricing and proceeds. Until now, CMBS borrowers have not had this kind of flexibility. The previous construction loan, also provided by Credit Suisse, was earmarked for the construction of the movie theater. But the company also wanted to lock in historically low interest rates and obtain long-term, fixed rate debt on the entire expanded property.

The new fixed-rate loan, which was sourced to Credit Suisse by Meridian Capital Group, was structured as a conduit loan with a 10% holdback that has additional flexibility written into the loan documents. This includes two years to complete construction. The size of the holdback, which is drawn down after construction is completed and leases are signed, is also unusually large. Officials at CSFB did not return calls.

The loan is collateralized by the property and the expectations of future rents and tenants based on AMC's track record, Balin said. By "leaning on the ground" and the expected results of the construction, Credit Suisse wrote a loan based on its expectations over the long-term. Construction on the movie theater is expected to be completed in the spring.

Credit Suisse was able to make this unusual commitment to AMC given its reputation as a long-term, value-added holder and this specific property's strength in its market, Balin said. Unlike many value-added players, the company does not flip properties, holding assets for 10 years or more. In addition, the company's investors are mainly sophisticated high-net-worth individuals and family trusts, making it wired differently in terms of how it views capital.

AMC also works with hotel groups to completely renovate and re-brand properties in strong markets. The company recently paired up with Anglo-Irish Bank to totally re-gut, renovate and rebrand an existing hotel owned by Paramount Hotel Group into a Sheraton. AMC is also working on a number of multifamily projects in Florida.