Powered By GE, SFI Sinks Three Pointer on Fremont Debt
SFI To Use Net Proceeds of $960 Million Financing to Repay Existing Debt
Costar reported today that GE Real Estate's New York regional office completed a $960million interest-only first mortgage financing with iStar Financial Inc., secured by 34 single-tenant office, R&D and industrial properties in 12 states.
According to Costar, this financing for iStar represents the largest debt deal of 2008 for GE Real Estate. It is also the largest loan originated by the company in the past several years. Funding of approximately $810 million occurred at the initial closing of the financing. The balance of the funds is expected to be provided before the end of the second quarter of 2008, subject to the finalization of additional loan documentation. The three-year financing is pre-payable in 20 months.
The Boston and New York offices of HFF (Holliday Fenoglio Fowler LP) arranged the loan on behalf of iStar and which closed in less than 45 days.
"While sizeable, this is a relatively conservative transaction, well-margined and secured by a geographically-diverse portfolio of single-tenant properties. Almost half the tenants are rated investment grade," said Alec Burger, president of GE Real Estate's North America Lending division. "We've known the management of iStar for several years and are confident they will use this financing to build a strong platform for the future. We see this as the first of many deals together."
HFF directors Janet Krolman and Greg LaBine and executive managing director John Fowler (New York) worked exclusively on behalf to secure the adjustable-rate, interest only, cross-collateralized and cross-defaulted loan.
"Historically, iStar would have obtained financing on an unsecured basis by utilizing the company's BBB, investment grade credit rating. However, the current market conditions are such that it was more efficient and cost effective to finance a subset of their existing single tenant portfolio on a secured basis," said Krolman.
"There were a number of ways to accomplish this including putting together a club deal to finance the portfolio, splitting the portfolio into smaller sub-portfolios or financing the whole portfolio with one source," LaBine added. "iStar concluded that a one-stop-shop alternative with GE was the best fit for their needs, as it was a simpler, cost-effective alternative that was accomplished in a very short time frame," Fowler said.
The portfolio of properties totals nearly 12 million square feet and is currently 99.6% occupied with an average lease term of 9.2 years. Nearly half of the approximately 21.9 million-square-foot portfolio is leased to tenants that are rated investment grade.
Costar reported that iStar will use the net proceeds of the three-year floating rate, cross-collateralized and cross-defaulted loan to retire existing debt, which presumably means the $1.3 billion Fremont acquisition loan due June 30.
With this new deal, SFI takes a significant step forward in the serpentine process of swallowing Fremont's commercial loan business. It's just one more fascinating story playing out in the REITwrecks world.
Costar reported today that GE Real Estate's New York regional office completed a $960million interest-only first mortgage financing with iStar Financial Inc., secured by 34 single-tenant office, R&D and industrial properties in 12 states.
According to Costar, this financing for iStar represents the largest debt deal of 2008 for GE Real Estate. It is also the largest loan originated by the company in the past several years. Funding of approximately $810 million occurred at the initial closing of the financing. The balance of the funds is expected to be provided before the end of the second quarter of 2008, subject to the finalization of additional loan documentation. The three-year financing is pre-payable in 20 months.
The Boston and New York offices of HFF (Holliday Fenoglio Fowler LP) arranged the loan on behalf of iStar and which closed in less than 45 days.
"While sizeable, this is a relatively conservative transaction, well-margined and secured by a geographically-diverse portfolio of single-tenant properties. Almost half the tenants are rated investment grade," said Alec Burger, president of GE Real Estate's North America Lending division. "We've known the management of iStar for several years and are confident they will use this financing to build a strong platform for the future. We see this as the first of many deals together."
HFF directors Janet Krolman and Greg LaBine and executive managing director John Fowler (New York) worked exclusively on behalf to secure the adjustable-rate, interest only, cross-collateralized and cross-defaulted loan.
"Historically, iStar would have obtained financing on an unsecured basis by utilizing the company's BBB, investment grade credit rating. However, the current market conditions are such that it was more efficient and cost effective to finance a subset of their existing single tenant portfolio on a secured basis," said Krolman.
"There were a number of ways to accomplish this including putting together a club deal to finance the portfolio, splitting the portfolio into smaller sub-portfolios or financing the whole portfolio with one source," LaBine added. "iStar concluded that a one-stop-shop alternative with GE was the best fit for their needs, as it was a simpler, cost-effective alternative that was accomplished in a very short time frame," Fowler said.
The portfolio of properties totals nearly 12 million square feet and is currently 99.6% occupied with an average lease term of 9.2 years. Nearly half of the approximately 21.9 million-square-foot portfolio is leased to tenants that are rated investment grade.
Costar reported that iStar will use the net proceeds of the three-year floating rate, cross-collateralized and cross-defaulted loan to retire existing debt, which presumably means the $1.3 billion Fremont acquisition loan due June 30.
With this new deal, SFI takes a significant step forward in the serpentine process of swallowing Fremont's commercial loan business. It's just one more fascinating story playing out in the REITwrecks world.
Labels: SFI
posted by RW at
4:28 PM
2 Comments:
iStar just tapped the unsecured debt market last week -- it agreed to sell $750 million aggregate principal amount of 8.625% Senior Notes due 2013. The Notes are senior unsecured debt securities of the Company and will rank equally with all of the Company's other senior unsecured debt.
I wonder if Fitch will downgrade them to junk now that they are encumbering their net lease portfolio.
Hi Patrick, thanks for the comment. I spoke with a friend last week who covers REITs full time. He and I had been wondering throughout 2005 and 2006 when all this madness was going to stop - and how it was going to stop - and at the time he was adamant that we were at a top and it was only a matter of time before the music stopped. He was a bit early, and relentlessly pessimistic, but ultimately right.
He attended the NAREIT conference two weeks ago and listened to Jay Sugarman present on behalf of Istar. My friend contends that SFI is in for major trouble with the Fremont portfolio, and that Sugarman remains too punch drunk to see it. He said that when asked, Sugarman did not detail any concrete plans for dealing with defaults except for talking broadly about the Istar "platform". I have heard that before...
Also, I heard Sugarman on one of the last conf. calls say that they were "agressively taking the keys back" from developers who default, and I have seen that before too. Rarely can one manage a defaulted condo project in Milwaukee from an office in NY and do a decent job of it.
Regardless of what Fitch says (I would postulate that you know as much or more than they do) about the debt, this is one of the riskier plays out there, so I am going to watch the show and wait. My friend isn't waiting: he has a heavy institutional short on it.
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