The Art of Balancing analytics and creativity to secure short and long-term financing from recourse and non-recourse lenders to reposition a 1970’s Office Park
Picture this – a 1970’s industrial park with considerable vacancies, needing some serious updating, upgrading and modernization, commonly known as Capital Improvements.
When tasked with leasing and financing the modernization and capital improvements of outdated industrial parks, it’s functional to get back-to-the basics starting with a basic, yet amended, SWOT analysis of Strengths, Weaknesses, Considerations and ultimately a success.
Capital Investment Schedule Maintained
Good Loan to Value Portfolio Wide
Lease Rollover Schedule
Small Business & Local Credit of Tenants
Upcoming Capital Improvements Schedule
Over Budget on Recent Capital Improvements
Initially the combination of these weaknesses drove up quoted rates on financing and prompted requests for large capital improvement escrows that would have greatly impeded ownership’s cash flow.
Mostly, this was because from a single lender’s perspective the complete eleven building portfolio contained many outdated and less desirable buildings that would require more conservative underwriting from a national lender’s perspective that was not as comfortable with local economy as a local lender would be.
I took as step back and applied a variety of underwriting scenarios to model and emulate each lender’s perspective
From this space, a hybrid solution quickly emerged achieving the desired results of both the ownership and lenders.
Solution: Loan #1 – National Lender
Mortgaged 3 of 11 Buildings
70% of required Debt
Non-Recourse, Fixed Rate, Long-Term Loan
Mid-High Loan to Value
Predominantly Regional & National Credit Tenants
Negotiated Carve-outs, Yield Maintenance, & Assignments
Solution: Loan #2 – Local Bank
Mortgaged 8 of 11 Buildings
Remaining 30% of Required Debt
Low Loan to Value
Pre-Approved Line of Credit to 65% Loan to Value
Predominantly Local Credit Tenants
Amended Existing Mortgage
Avoided Typical Loan Costs
Taking a step back and looking at the issue from all sides, I was able to see the hybrid approach, yielding a great result for ownership and strategically positioning them for the future
Today, ownership has continued to grow their holdings and they continue to win deals and discounts, because the line of credit allowed for a quick close. Those expedient purchases were made with confidence because of the consistent underwriting and continual evaluation afforded by the market knowledge and insights to our team. Every owner can create their own value similar to what happened here by identifying each stakeholder’s wants and needs and then proceeding appropriately. I learned by taking a step back, I could see the forest for the trees and logical solutions began to emerge.