Half-Billion in Financing Closes for 880,500-SF Government-Leased Portfolio

Funding, part of which was actually completed in late 2009, for the four-property portfolio comes in the form of a $271 million construction loan and $256 million in permanent financing.

October 29, 2010
By Barbra Murray, Contributing Editor

Having the federal government on the tenant roster is a plus in the eyes of lenders, but even with that advantage, one of Newmark Realty Capital Inc.’s latest accomplishments was no simple feat. The commercial mortgage banking firm just wrapped up the orchestration of $527 million in financing for an 880,500 square-foot, government-occupied office and industrial portfolio.

Funding, part of which was actually completed in late 2009, for the four-property portfolio comes in the form of a $271 million construction loan and $256 million in permanent financing; Newmark will service both. The group of assets consists of the new $112 million, 474,000 square-foot National Archive and Records Administration Headquarters in St. Louis, as well as new Regional FBI facilities in Cincinnati, Minneapolis and Portland. “The federal government has a mandate to develop secure properties,” George H. Mitsanas, principal with Newmark, told CPE. Mitsanas and Peter Hillakas, associate vice president with the firm, were responsible for arranging the financing. “Post-9/11 and post-Oklahoma City, requirements have changed for the FBI, and they need much more secure facilities.” Additionally, some of the projects involved consolidation to achieve greater efficiency. And then, there is the matter of jobs.

Together, the projects, the last of which is scheduled to reach completion in June 2012, will produce several thousand construction jobs, and ultimately, thousands of permanent positions. “A number of U.S. senators at the groundbreaking ceremonies noted that it was a wonderful thing we accomplished together, putting people to work, particularly in Oregon, which has one of the highest unemployment rates in the country,” Mitsanas said.

Credit markets are slowly defrosting, but the fact that the government has signed long-term lease agreements to occupy the properties involved helped pave the rocky road to securing the necessary loans, and, indeed, the road was full of hurdles, including a ground lease and an option on a facility bond. “The markets have loosened up, but for any other tenant, the terms for this financing would not be available.”