Aries Capital Closes $26.5 Million First Mortgage For Chicago’s State-of-the-Art, Mixed-Use Green ExchangeJanuary 9, 2013
Aries Capital is pleased to announce that Senior Vice President Jeff Bucaro, from the firm’s Chicago office, has secured a $26.5 million 10-year non-recourse CMBS loan for Chicago’s Green Exchange, a 270,000 square foot, LEED Platinum, Class A mixed-use property located at 2545 W. Diversey in Chicago.
After former owner Cooper Lamp Factory closed local operations in 2005, David and Douglas Baum, founders of Baum Development, purchased the shuttered landmark building with plans to create a sustainable, environmentally friendly, state-of-the-art office and retail community. While the Baums’ vision for the Green Exchange was clear, how to find the necessary financial resources in the midst of the credit crisis was not. Mid-stream in the renovation, the Baums’ existing construction lender announced it was unable to continue financing due to the credit crisis, forcing them to stop the renovation and seek alternative sources while still trying to convince prospective tenants of the vacant shell’s potential and retain the lease agreements they had already negotiated.
After finding a substitute construction lender despite ongoing tight market conditions, the Baums were able to resume the renovation and attract and retain high quality tenants such as one of the country’s leading new companies, Coyote Logistics. In addition to the original construction loan, the Baums had secured a $15 million HUD 108 loan for redevelopment in blighted lower-income areas from the City of Chicago, along with Tax Increment Financing (TIF). The borrowers also leveraged the property’s eligibility for Historic Tax Credits which allow for as much as 20% of the project’s renovation expenses to be monetized. As a landmark building, the Green Exchange further qualified for Class L tax benefits, reducing or freezing the building’s property tax rate for 12 years.
In June 2012, the Baums sought permanent financing by proactively engaging Aries Capital. “The Baums did an amazing job of developing, leasing, and stabilizing the asset during one of most challenging times in commercial real estate ownership.” said Bucaro. “They were also very creative in their utilization of a multitude of subsidies to capitalize and complete the development, however, this created some major obstacles and complications when it came to securing permanent debt.” Aries leveraged their firm’s expertise in Tax Credit structuring, along with its long-standing relationships in the capital markets, and successfully secured a $26.5 million CMBS first mortgage to supplement and integrate with the Borrowers’ existing recorded HUD 108 Loan, Historic Tax Credit financing, TIF dollars and Class L tax freeze benefits. The combined financing package provided Baum Development with reserves for future leases and rent abatements, and augmented the loan proceeds by utilizing the future cash flow from executed leases with occupancy 18 months out. In addition to Coyote Logistics, the Green Exchange is currently leased to WeFarm America, NewGrange Development, Green Energy Improvement and Green Choice Bank among others. The property has obtained LEED Platinum designation, the highest Green certification available.
“With the unique nature of the property, its complex revenue streams and capital structure, and the lack of obvious comparable properties, we knew financing would prove to be a challenge,” said David Baum of Baum Development. “We chose Aries based on their strong reputation in the market for getting highly complex financing structures closed.”
“We are thrilled to provide an attractive non- recourse financing solution for Baum Development at Green Exchange,” said Aries Capital Chairman and CEO Neil Freeman, “David and Doug showed enormous determination and creativity to create a world class building and substantial job opportunities in the Chicago neighborhoods. Combining their leasing expertise with government financing incentives, the Baums have created a national model for a successful green development that very few developers could have accomplished.”