(#7208) Washington DC, $300m, debt: Multibillion dollar portfolio seeking $300m LoC or mezzanine financing for office assets

Loan term: 15 to 20 years 

Loan type: unsecured, line of credit 

About the Issuer: The Issuer is a development and investment vehicle of a multi-billion dollar single family office, currently owner of interest in various SPEs that own the assets. The Issuer wants to increase percentage ownership in what they currently own. Issuer is Washington DC based and its existing portfolio is about 3.5M square feet, roughly half office and half residential. Total market value is over $2bn.

Purpose

  • To partially buyout partners of the Issuer firm that are looking for liquidity. 
  • The plan is to form a new “Special Purpose Entity” (SPE) that will be the buyer. 
  • As existing Senior Debt comes due, we will have greater flexibility to assess debt ratios and preferences.

About the assets:

  • All are office buildings.  
  • The number of initial targeted assets is 4-7.  
  • The value of the 4-7 assets today is approximately $1.5-$1.8Bn and, possibly more.
  • NOI for the total asset group is approximately $140M.
  • Issuer already owns approximately 25-30% of all of the assets, in some cases more and in some, less, so, realistically it is focused on acquiring an additional 30-45%.
  • All of the targeted assets have Senior Secured Debt in place. 
  • Current debt on the 7 assets is around $350M. 
  • The majority of this debt is low in LTV (25%<). 
  • Given the cost of prepaying these loans and the fact that they are competitive in terms of pricing, it is our intention to simply keep the existing, attractive debt in place.

Structure:

  • The new acquirer entity would be an UpReit for ease of transfer of the interests. 
  • The newly-formed, acquisition entity will not be the sole owner of the entities in which we are accumulating ownership. 
  • It is our goal to have that change, over time, and if we can get to 65-75% of ownership in these SPEs we effectively will have total operational control. 

Optional additional information:

  • The current loan agreements may prohibit the separate pledging of LLC or LP interests. 
  • The new acquirer entity can own these interests, subject to the operative language in LLC agreements.  
  • The new entity can take on separate debt, but it would be unsecured, except by the entity itself.  
  • If this is an UpReit, it can use its UpReit units as security.
  • Existing lenders have the right to approve the new partner loan and any pledge of newly acquired interests.
  • I realize that an unsecured loan is a challenge.  The new entity would, ideally, pledge its newly acquired LLC interests as collateral.
  • The second wave of acquisitions would target additional office buildings, multi-family and hospitality assets.