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Retail Property Loans: Critical Lending Points

Oscar R. Rivera
May 1, 2025

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Retail property owners and borrowers should look at a few key points to negotiate when obtaining financing for a project. These items  should be reviewed during the term sheet and loan commitment phase. Often, once the loan documents have been drafted by the lender’s counsel and delivered for review to the borrower’s counsel, much of the leverage to negotiate these points is gone.

Retail Loan Factor 1: Insurance

A critical loan factor that should be addressed is insurance. Borrowers must  obtain insurance to protect the lender’s interests and provide certificates evidencing the existence of the insurance and policy copies. In single-tenant buildings and  large tenant situations, the landlord should make sure that their lease forms contain flow-down provisions requiring tenants to maintain lender-required insurance, include the lender as an additional insured and provide evidence of these two factors to both the owner and the lender. The loan documents should allow  the borrower to rely on this insurance and have such insurance substitute the borrower’s required insurance, thereby reducing the landlord’s insurance costs.

Factor 2: Lease Approvals

Another vital loan factor is lease approvals. Retail loans often require lender approval for new leases, amendments, terminations and assignments. Nevertheless, this should be limited to major leases, providing borrowers flexibility with smaller, non-major leases.

Borrowers should be able to sign new leases and amendments without lender approval if they  meet certain economic minimums, are not a Major Lease (often defined as one over a minimum square foot number) and  follow the lender-approved standard form. However, major leases and significant amendments, even to minor leases, need lender consent. Lenders are notoriously slow. If possible, negotiate a “deemed approved” clause, where a lease is approved if the lender doesn’t respond within a set time, even if a second notice is required.

Retail Loan Factor 3: Estoppels

The last factor is estoppels. Lenders will require estoppel statements from tenants to confirm there are no lease defaults affecting cash flow and confirm the lease terms and financial details. These will be required from a certain minimum number of tenants or of square footage of the property. Try to limit the requirement to anchor and larger tenants to avoid delays from non-responsive small-shop tenants and negotiate as low as possible a minimum threshold (70%).

Sorting out these details during the term sheet phase can help streamline the process and avoid future issues or misunderstandings. Please call our office for assistance with your next retail lease or loan.