The Situation
A California dissolution proceeding involved two spouses who jointly owned a 14,000 square foot NNN retail strip center in the Los Angeles metropolitan area. The property was owned free and clear -- no existing mortgage. It was appraised at approximately $5.4 million and generated approximately $312,000 in annual NOI from four tenants on triple-net leases. One spouse wished to retain the property as a long-term investment. The other spouse wished to receive cash at settlement equal to their community property share -- approximately $2.7 million. The dissolution settlement agreement required the retaining spouse to either close a buyout refinancing or agree to a sale within 90 days of the settlement judgment.
The Challenge
The retaining spouse had 90 days from judgment to arrange $2.7 million in financing -- in an environment where the property had no existing mortgage history (lenders prefer to see existing debt service history), the borrower entity was a community property trust that was being restructured in connection with the dissolution, and the family law court had imposed a lis pendens on the property that needed to be cleared at close. The retaining spouse's family law attorney recognized that a standard bank approach -- submitting to one or two local banks, waiting for committees -- would consume most of the 90-day window with no guarantee of approval. She referred the client to Commercial Lending Solutions with 74 days remaining on the court deadline.
Our Approach
Commercial Lending Solutions identified the critical path: (1) clear the lis pendens, which required the dissolution judgment to be final, and (2) close the financing before the 90-day window expired. We had approximately 45 business days. The property's characteristics made it a strong candidate for CMBS: four tenants on NNN leases, strong credit tenants, long weighted average lease term, no deferred maintenance, free-and-clear basis meaning the new loan would be the only encumbrance. CMBS lenders are not bank committees -- they underwrite to credit criteria, not lender policy, and can close in 35-55 days from a complete package. We submitted to three CMBS conduit lenders simultaneously with a complete package including the dissolution settlement agreement, the community property trust documents, and a title commitment showing the lis pendens as the only exception. Loan amount: $3.15 million (approximately 58% LTV), 10-year fixed rate, interest only for the first three years, non-recourse. One CMBS lender issued a commitment in 14 days. Rate locked. The title company cleared the lis pendens simultaneously with the loan closing.
The Outcome
The loan closed in 38 days from engagement -- 36 days before the court deadline. The retaining spouse received $3.15 million in loan proceeds. $2.7 million was distributed to the departing spouse as their settlement payment. The retaining spouse retained the property with a 10-year fixed, non-recourse loan at 58% LTV and approximately $312,000 in annual NOI. The family law attorney filed a final accounting with the court confirming all settlement obligations had been satisfied within the required window.
Key Takeaway for divorce attorneys
Divorce attorneys managing commercial real estate assets in dissolution proceedings should engage a commercial mortgage broker the moment a buyout financing deadline is set -- not after a conventional bank declines. CMBS and other non-bank lenders can close on NNN and other income-producing properties within 35-55 days. Court-imposed deadlines are not negotiating points with lenders; they are schedule constraints that require a broker who moves at that pace.
A note on figures: All dollar amounts, rates, timelines, and specific details in this case study are illustrative and based on hypothetical scenarios representative of the types of transactions Commercial Lending Solutions arranges. They are not descriptions of any specific client, property, or transaction.