Why Spectra Provided the Loan
Spectra's investment decision centered on the convergence of experienced sponsorship, exceptional structural protections, and clear value creation through the executed lease.
The fifteen-year triple-net lease with Slick City provided income certainty beginning in month nine, with the tenant—not the landlord—responsible for all improvement work. This structure eliminated construction risk while providing a clear path to stabilized cash flow supporting permanent refinancing. The rent commencement occurring regardless of improvement completion further protected the income timeline.
The borrowers' track record proved particularly compelling: two successfully completed similar projects without payment defaults, over fifteen years of relevant retail leasing experience, and current ownership of two comparable assets. This operational history provided confidence in both execution capability and commitment to performance.
From a structural perspective, the transaction offered exceptional downside protection. The stabilized loan-to-value ratio of 38% based on conservative underwriting assumptions provided substantial equity cushion, while the $2.5 million out-parcel sale contract represented additional security and a potential accelerated repayment source. The property's location in a high-traffic retail corridor with over 20,000 vehicles per day, combined with its prior success as a grocery store, validated the site's fundamental commercial viability.
Why This Borrower Chose Spectra
The borrowers selected Spectra based on several factors that enabled efficient transaction execution. Spectra's ability to close rapidly aligned with the acquisition timeline requirements, while the 100% loan-to-cost financing structure preserved the borrowers' capital for other investment opportunities and operational needs.
Critically, Spectra's flexible approach to capital structure allowed the property seller to retain a second-position loan as part of the overall financing package. This structural accommodation proved essential to completing the acquisition on terms acceptable to all parties, demonstrating Spectra's willingness to work within complex transaction structures that traditional lenders typically cannot accommodate.
The borrowers recognized that the substantial value creation inherent in the repositioning strategy—transforming a vacant former grocery store into a leased entertainment venue—would far exceed the bridge financing costs over the twelve-month term, making execution certainty and structural flexibility more valuable than rate optimization.
Background
Experienced retail investors acquired a 55,632 square foot retail property in Greenwood, a suburban community within the greater Indianapolis metropolitan area, for $3,970,000. The borrowers sought a twelve-month bridge loan to fund both the acquisition and tenant improvement work required to reposition the vacant 2001-vintage asset.
Prior to closing, the borrowers had executed a fifteen-year triple-net lease with Slick City Greenwood, a family entertainment center operator, with rent commencement scheduled for month nine of the loan term regardless of tenant improvement completion status. Notably, the lease structure assigned all build-out responsibility to the tenant rather than the landlord, eliminating construction completion risk from the borrowers' obligations.
The borrowers brought substantial relevant experience to the transaction, including ownership of two similar retail assets, successful completion of two comparable repositioning projects without defaults, and over fifteen years of professional experience in retail leasing for a private REIT specializing in retail properties. Additionally, the borrowers had secured a contract to sell an out-parcel carved from the existing parking lot for $2.5 million, providing an additional liquidity source and further de-risking the transaction.
The property's history as a popular grocery store in a high-traffic location, combined with the borrowers' plan to refinance into permanent financing three months after tenant occupancy, created a clear path to loan resolution through traditional retail financing channels.
Market Overview
The property is located in Greenwood, a suburban community within the Indianapolis MSA—the 34th largest metropolitan area in the United States. Positioned approximately fourteen miles south of downtown Indianapolis, the site benefits from established retail infrastructure and traffic patterns exceeding 20,000 vehicles per day.
The Indianapolis retail market demonstrated resilient fundamentals at the time of loan origination, with both the broader market and the Greenwood submarket experiencing low vacancy rates of 3.1% and 2.9%, respectively. While retail rents experienced modest compression in 2023, the longer-term trajectory showed considerable growth, with market rents increasing from $12.12 per square foot in 2018 to $15.47 as of Q4 2023, and submarket rents advancing from $14.06 to $16.27 over the same period.
Demographic trends further supported the investment thesis. Population within a five-mile radius of the property grew 3.99% between 2020 and 2023, with projected growth of 2.36% through 2028. Per capita income was expected to increase 14.34% over the 2023-2028 period, reflecting continued economic expansion and enhanced consumer spending capacity supporting retail and entertainment venues.
