Retail Dining Developments

Karate and dance studio find new Lake Mary home with SBA 504 loan help

A martial arts academy and a dance studio are getting a new 11,000-square-foot home in Lake Mary, with the help of a federally guaranteed SBA 504 loan for just over $2 million.

Construction is scheduled to start this week on the building at 905 Williston Park, just west of Rinehart Road. The company developing the property, 905 Williston Park Point Development, is a partnership between Champion Karate Inc. owner Mike Friedman, and Jenny Clifton, owner of Focus Performing Arts Studio.


When the building is finished, Clifton will own 57 percent of the property and Friedman 42 percent. The finished structure will include a café for patrons of both businesses.

The new development group bought the 1.3-acre lot from Rinehart Properties LLC for $630,000 in late June. The total loan for land and construction is $2.01 million, with a total eligible loan value of $2.23 million.


Because of the Small Business Administration 504 loan, available for small and mid-sized commercial businesses, Friedman and Clifton will only have to put up 10 percent of the $2.23 million value. Generally, commercial mortgages provide just 70 to 80 percent of the money needed for land and construction, said Chris Hurn, CEO of Fountainhead Commercial Capital, which constructed the SBA 504 loan package for Friedman and Clifton.

"We did 90 percent financing on this project," Hurn told GrowthSpotter on Friday. "This project could have happened conventionally, but they would have had to put down 20 to 25 percent."

The SBA 504 works like this: Two mortgages make up the loan, with two liens on the property and building. The first mortgage is from a private lender covering 50 percent of the project cost. The second mortgage, covering 40 percent of the project costs, is from a SBA-certified development company, backed 100 percent by the U.S. government's creditworthiness. The borrowers put up the remaining 10 percent.

"Because it has the government guarantee, the interest rate is much lower, below market," Hurn said. "I often call it the best kept secret in commercial real estate lending."

Hurn estimated that interest on the final construction loan will be in the 4 percent range. The 50-year average for commercial loan rates is about 8.25 percent, he said.

The lower rate means small and mid-sized businesses have more cash flow to invest in their building and operations.

The favorable terms of a SBA 504 loan are meant to encourage business owners to buy their buildings and land, rather than lease.

"They're creating value and wealth for themselves by owning real estate instead of leasing," Hurn said.


Friedman said he and Clifton have had businesses in Lake Mary for 14 years, are both cramped at their present locations and excited about opening in a brand new building.

The two business owners consulted with BHM Architecture, the Altamonte Springs firm designing the building, so the final layout will fit their needs, Friedman said.

"That was the great thing: We got to design this thing from the ground up, which is every person's dream," Friedman said Friday. "Typically, when you have a lease situation, you have to take what you get and do your best to meet the needs of your members. What we were able to do is build it to suit them from day one."

Fountainhead Commercial Capital is based in Maitland. The general contractor on the project is Precision Building Construction of Orlando.

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