GE Real Estate Funds $960M for 34-Property iStar Portfolio
- May 05, 2008
New York City-based iStar Financial Inc. has taken a single-source $960 million loan against a portfolio of 34 triple-net-leased single-tenant properties. Holliday Fenoglio Fowler L.P. (HFF) arranged the adjustable-rate, interest-only loan through GE Real Estate. “Normally a publicly traded, investment grade REIT such as iStar would just borrow unsecured,” Janet Krolman (pictured), an HFF director, told CPN today. “But that market is pretty tough right now, and the most cost-effective way to raise capital is by doing a secured financing such as this.” The portfolio loan has been cross-collateralized and cross-defaulted. “A cross collateralized pool gives the lender more security than individual loans on each property,” continued Krolman. Under a cross-collateralized structure, a number of properties support each other. If, for example, one property loses a tenant and has cash flow problems, the lender could look to the other properties to make up the difference. An alternative structure would have been to split the portfolio into sub-portfolios and syndicate the loan among a number of lenders. The single-source option was a simpler, faster and more cost-effective alternative. The 34 office, R&D and industrial properties in the portfolio are 99.6 percent occupied with an average lease term of 9.2 years. Nearly half of the approximately 11.9 million-square-foot portfolio is leased to investment grade tenants. The properties are located in 12 states, with a strong concentration on both coasts in cities such as Los Angeles and San Francisco on the west coast and Washington, D.C., and Atlanta on the east coast. “Overall, the portfolio is very diverse geographically,” Krolman said. One of the few lenders capable of handling such a large single-source loan, GE Real Estate has more than $79 billion in assets and a presence in 32 countries throughout North America, Europe, Asia and Australia/New Zealand. iStar Financial is a real estate investment trust that provides investment capital to private and corporate real estate owners. The company’s financial products include senior and mezzanine real estate and corporate capital as well as corporate net lease financing and equity. HFF specializes in debt placement, investment sales, structured finance, private equity, note sales and note sale advisory services and commercial loan servicing.