Industrial Property Bridge Loan In Central Florida

OPPORTUNITY

An experienced industrial investor/operator found an opportunity to buy a single-tenant manufacturing facility in a thriving market, and had secured a tenant for the space under long-term lease. When it needed capital to complete the purchase and prepare the building for occupancy, the sponsor turned to Red Oak Capital.

Situated on nearly 10 acres in Melbourne, FL, 4401 Fortune Place is an 80,107-square-foot property in Central Florida’s Space Coast. Built in 1998 and renovated in 2021, the Class “B” facility was last used to manufacture sunscreen products and hand sanitizer.

The borrower is using the loan proceeds to close the $12.5-million purchase as well as pay for leasing commissions for the tenant, Blue Origin. The Jeff Bezos-owned aerospace company will take occupancy once the sponsor completed tenant-specific improvements to the building.

SOLUTION

Red Oak provided the sponsor with a $10.18-million bridge loan underwritten under its CorePlus Bridge Program. The interest-only loan carries an 8.50% note rate and a 24-month initial term with two six-month renewal options. The financing represents a 73.41% “As-Is” LTV, and 67.39% of the “As-Stabilized” value.

The borrower plans to exit the Red Oak loan via permanent financing upon completion of the re-tenanting of the building. Based on the new lease, the value of the property at the maturity of the loan would be approximately $15.65 million.

CONSIDERATIONS

The sponsor entity, Reich Brothers I, LLC, is managed by a pair of brothers with nearly 50 years of aggregate experience in acquiring, managing and disposing industrial properties and machinery.

The Palm Bay-Melbourne-Titusville, FL MSA has a strong and diversified economy, with an unemployment rate that’s trending closer to 2% each month. Significant investment by both NASA and private space companies like SpaceX and Blue Origin is creating thousands of high-paying jobs and sustaining a pace of activity not seen since the 1960s. Employment in STEM industries here surged by 41% between 2015 and 2020, compared to 8.9% nationwide.