Bridge loan in Illinois

OPPORTUNITY

A longtime Chicago-area investor approached Red Oak Capital Holdings for a loan on a class B multi-tenant property at 3850 W. Cortland St. in North Chicago, Illinois. Having acquired the asset in late 2019 for nearly $3.7 million, the borrower plans to use the loan proceeds to pay off a matured loan and complete upgrades to the property.

Located on a 1.1-acre site, the 92,511-square-foot building was built in 1960 and last renovated in 2019. It features a 37,249-square-foot office component, as well as 12’ to 22’ clear ceiling heights, four dock-high doors, and six at-grade drive-in doors.

SOLUTION

Red Oak provided $4.25 million in financing underwritten under its Opportunistic Bridge Loan Program. Structured with a note rate of 10.50%, the debt carries a 12-month term with two 6-month renewal options. The loan represents 66.41% of the asset’s “As-Stabilized” value of $6.4 million.

After paying off the matured loan, the sponsor will use the balance of the funds on capital upgrades, tenant improvements and leasing commissions to help bring the property to stabilization before exiting the Red Oak loan via a sale or permanent financing. The sponsor has already had discussions with multiple potential buyers, as well as with existing tenants looking to expand within the facility.

CONSIDERATIONS

The sponsor, Michael Goldstein of Chicago Property Investors LLC, has a 40-year history of purchasing large single-tenant buildings and converting and rehabbing them into multi-tenant spaces. He has amassed a portfolio of some 70 commercial properties in the Greater Chicago region, including the former 1.2-million-square-foot Brach’s Candy factory and 1.2 million sf of former Unilever buildings that were later sold to Menards and Walmart.

Red Oak remains bullish on the Metro Chicago industrial market, one of the largest in the country. Vacancy rates remain below 4% and rents continue to rise despite slight softness in recent months. Though new construction will add to the weakness in the short term, the lack of financing will curtail additional deliveries in the face of continued demand, bolstering further rent growth.