Two Surprising Financing Secrets
From all equity to generating confidence to debt and mez deals, we got financing insights into two of Atlanta's biggest development projects during our Atlanta State of the Market event last week.
Reznick Capital Markets' Michael Hartman, North American Properties' Mark Toro, Daniel Corp's Pat Henry, Oliver McMillan's Hunter Richardson, and Cortland Partners' Steven DeFrancis talked about how they get money for their projects. (They don't even have to do chores to save up their allowance.) And their revelations may surprise you. For instance, Oliver McMillan began construction of the long-stalled Buckhead, Atlanta project without a construction loan in place for a very specific reason: “As a result, we got the tenant's attention,” Hunter said to our crowd of more than 500.
Hunter says the marketing for Buckhead, Atlanta, which has lured some exclusive retailers like Brunello Cucinelli and Canali, happened outside of Atlanta. “The people that we're after are not used to coming to states and going to enclosed malls,” he says. “As a result, our leasing efforts are in Paris and Rome.” Hunter also confirmed that Oliver McMillan put its own equity in the project along with CBRE Global Investors. “We showed up with the equity in hand. Equity talks, and talks all day long." (Just don't get it talking about sports or you'll be there all night.) Click the video above to hear Hunter talk about why multifamily is critical to the project as well.
Mark's firm marked a huge milestone during our conference last week—Avalon is now 97% leased. Not bad for a project that began during the recession. To get it going, Mark says North American secured 35% equity financing with an unnamed pension fund “with a slice of Mez,” (nothing too big, they didn't want to spoil their appetite for dinner) and a $125M construction loan with Wells Fargo. We reported here last week that Avalon also is in talks with Leaseplan for a big chunk of office space.
On the multifamiy side, Steven says Cortland got into distressed acquisitions in 2010 as a short-term strategy until the capital markets recovered. Then execs discovered that the strategy may be a better move for the long-term. “We recognized that there was a lot of value to be created by taking not just old, but older [apartment complexes]… and repurposing the target it was directed to,” Steven says. “Unlike Hunter, we're not going to Paris and Milan. We're going to Chamblee and Brookhaven to get our tenants.” (Saves on gas money.)
We caught up with sponsor CrowdVested's Grady Thrasher, who didn't get much sleep the night before. That's because CrowdVested (an online crowd funding real estate vehicle, which we originally reported here) just launched its first fund raise for a $3.5M project in East Atlanta Village. Grady says its a 26k SF retail project that's part of Paces Properties project called Glenwood Avenue Retail. Grady says the site is attempting to raise up to $1M in equity for the project.
We also chatted with Choate Construction's Bill Bland over morning java at Westin Buckhead and got the skinny on two of the firm's latest GC deals: Perennial Properties' West Midtown Housing and North & Somerset. Bill also says the firm has been tapped to do the pharmacy school at Mercer University.