Regions Midatlantic | Washington, DC
Oct 1, 2008
By: Barbra Murray, Contributing Editor
Despite being slowed down by the economy's downward spiral and the debilitating credit crunch, Washington, D.C.'s office market has remained relatively strong. Still, securing a substantial financing deal in the midst of the Wall Street crisis may seem like a bit of a pipedream. A newly announced transaction, however, has disproved that notion.
Republic Properties just got its hands on $212 million in financing for The Portals III (pictured), its nearly 510,000-square-foot premier office building in budding southwest Washington, D.C. Acting on behalf of Republic, real estate services firm Cassidy & Pinkard Colliers orchestrated the two-tiered debt transaction that consisted of a senior loan from a commercial bank on the West Coast and a mezzanine loan through a national pension fund advisor.
Even more surprising than attaining financing at all right now s the fact that Cassidy & Pinkard, managed to arrange a two-lender package on a property that is only 45 percent leased. "The challenging parts of the deal were the fact that Portals III wasn't a stabilized asset, and the size of the loan," David Webb, Sr., managing director with Cassidy & Pinkard, told CPN. "Bigger used to be better, but now most lenders like to spread their debt." Completed in 2006 at 1201 Maryland Ave., The Portals III encompasses about 480,000 square feet of Class A office space and 30,000 square feet of retail offerings. The nine-story structure is part of the $1 billion The Portals, an approximately 1.5 million-square-foot mixed-use waterfront destination located in what is one of the last remaining developable areas in the District.
Southwest Washington, a previously overlooked area of the city, has been experiencing a development boom, spurred in no small part by the new $600 million Nationals Park baseball stadium. For a while, new office leases were abundant, with the delivery of Class A office buildings and the promise of a bevy of neighboring amenities serving as magnets for new tenants. But the current economic climate has changed the dynamics of leasing, investment and construction, rendering the concept of closing big financing deals nearly inconceivable. "It is pretty unusual to see this kind of deal in southwest right now," Tonya Ginter, director of research and marketing for commercial real state services firm GVA Advantis, told CPN regarding Republic's loans for The Portals III. "There has been a lot of development activity in southwest, but there are concerns that the credit crunch and the financial crisis will put a hold on construction, and put a damper on those leasing markets."
However, according to Webb, financing is not as much of an improbability as it would seem. "In July of last year, we would have gotten this deal done with one lender, but now you have to get mezzanine debt; it's today's way of getting the same proceeds we used to get through senior debt," Webb said. "There are literally new sources of mezzanine debt coming in every week, and they are getting better in price. Very few funds want to invest equity now, so they give up the upside and in return, accept a more secure but attractive rate. Financing is there today, it's just hard to come by; financiers are looking for better developments and better projects."
By: Barbra Murray, Contributing Editor
Despite being slowed down by the economy's downward spiral and the debilitating credit crunch, Washington, D.C.'s office market has remained relatively strong. Still, securing a substantial financing deal in the midst of the Wall Street crisis may seem like a bit of a pipedream. A newly announced transaction, however, has disproved that notion. Republic Properties just got its hands on $212 million in financing for The Portals III (pictured), its nearly 510,000-square-foot premier office building in budding southwest Washington, D.C. Acting on behalf of Republic, real estate services firm Cassidy & Pinkard Colliers orchestrated the two-tiered debt transaction that consisted of a senior loan from a commercial bank on the West Coast and a mezzanine loan through a national pension fund advisor.
Even more surprising than attaining financing at all right now s the fact that Cassidy & Pinkard, managed to arrange a two-lender package on a property that is only 45 percent leased. "The challenging parts of the deal were the fact that Portals III wasn't a stabilized asset, and the size of the loan," David Webb, Sr., managing director with Cassidy & Pinkard, told CPN. "Bigger used to be better, but now most lenders like to spread their debt." Completed in 2006 at 1201 Maryland Ave., The Portals III encompasses about 480,000 square feet of Class A office space and 30,000 square feet of retail offerings. The nine-story structure is part of the $1 billion The Portals, an approximately 1.5 million-square-foot mixed-use waterfront destination located in what is one of the last remaining developable areas in the District.
Southwest Washington, a previously overlooked area of the city, has been experiencing a development boom, spurred in no small part by the new $600 million Nationals Park baseball stadium. For a while, new office leases were abundant, with the delivery of Class A office buildings and the promise of a bevy of neighboring amenities serving as magnets for new tenants. But the current economic climate has changed the dynamics of leasing, investment and construction, rendering the concept of closing big financing deals nearly inconceivable. "It is pretty unusual to see this kind of deal in southwest right now," Tonya Ginter, director of research and marketing for commercial real state services firm GVA Advantis, told CPN regarding Republic's loans for The Portals III. "There has been a lot of development activity in southwest, but there are concerns that the credit crunch and the financial crisis will put a hold on construction, and put a damper on those leasing markets."
However, according to Webb, financing is not as much of an improbability as it would seem. "In July of last year, we would have gotten this deal done with one lender, but now you have to get mezzanine debt; it's today's way of getting the same proceeds we used to get through senior debt," Webb said. "There are literally new sources of mezzanine debt coming in every week, and they are getting better in price. Very few funds want to invest equity now, so they give up the upside and in return, accept a more secure but attractive rate. Financing is there today, it's just hard to come by; financiers are looking for better developments and better projects."
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