Institutional Grade Leveraged Debt Opportunity
Participate in institutional financing for a $104 million CRE construction loan for industrial development.
1. A timely short-term investment, poised to capitalize on the high interest rate environment
B-note investors will benefit from the spread on the interest rates between the A/B notes, while still holding a senior position on the capital stack. Investors stand to gain from additional upside potential in the event that interest rates increase, while having downside protection with a SOFR floor of 3.75% on the entire loan.
2. Projected exit in 20 months
Horizontal construction is expected to be completed in January 2024, with vertical construction commencing thereafter. The stabilization period is expected to begin upon construction delivery in September 2024, and last up to twelve months.
The loan maturity date is August 28, 2025, and the projected exit scenario is a refinancing after stabilization. CBRE and Colliers have valued the stabilized asset at $165M and $166.24M respectively.
3. Construction has already begun and permitting is in process
Groundwork at the industrial park began in October 2022 with excavation at the subject site beginning in January 2023. The developer is currently completing grading work at the site, excavating for footings, and pouring slab. Permits received include electrical, plumbing, and mechanical. Construction is expected to be completed in eleven months.
4. Risk mitigation includes the developers strong financial standing, collateral, and guarantees
5. Top industrial growth market in 2023
CBRE named Las Vegas as a top industrial growth market in 2023.5 Both JLL and Colliers have reported that the region has seen continuous strong demand in 2023, which in turn has driven leasing, construction, a low vacancy rate of 1.6%, and rising rents. Quarterly absorption topped 3M SF as of Q2 2023.6
The asset is located in the North Las Vegas industrial corridor, which is an epicenter for industrial development and has attracted national developers including Prologis, Panattoni, Blackstone, and Dermody. The region is home to four Amazon fulfilment centers, as well as facilities from major companies including Walmart, Sephora, TJ Maxx and Kroger.
6. Experienced local developers
Moonwater Capital and Western States, two expert developers, have joined forces in this construction project. Moonwater Capital is a development and acquisitions firm with a portfolio comprising of 2.5M SF of mixed-use development and acquisitions, including nine office deals in Las Vegas. Western States, a contracting firm, is the largest non-union engineering firm in Nevada, with $200M revenue in 2021 and a 40-year track record.
(1) A-Note lender is Axos Bank.
(2) Quarterly distributions will be paid from a $15 million interest reserve over the lifetime of the loan; Projected cash yield of 10%, on a quarterly basis. Lender will directly draw down from the interest reserve account. Details in Section 3.4 in the Borrowers Loan Agreement.
(3) Collateral is valued at $67.6 million according to CBRE appraisal dated May 2023.
(4) Loan term of 24 months, 20 months remaining.
(5) CBRE: Top 10 Industrial Markets Q1 2023.
(6) JLL: Las Vegas – Industrial Insights: Leasing outlook anticipated to remain strong/ Colliers: Las Vegas Industrial Q2 2023.
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