Blashaw: Our goal was to structure the financing in a way that would allow our client to benefit fully from the true value potential of the asset and the ongoing revitalization in the region. The buyer was drawn to this asset primarily because of this potential for future value creation. At the time of acquisition, the asset was currently operating with rents that were below market value and was in need of some renovations. The property is also located just under a half mile from a new, $450-million development in the Platinum Triangle near the Angel Stadium of Anaheim. This development will serve as a catalyst for future growth and significantly enhance the value of the sponsor's asset over time.

We structured interest-only payments for the first 18 months of the loan, which would provide increased cash flow near the beginning of the term. This increased cash flow afforded the sponsor with the flexibility to make capital improvements to the asset and bring current rents up to market value, positioning the business park for future growth.

GlobeSt.com: What buyers and lenders need to do in order to for these structures to work?

Blashaw: To secure financing for these more complicated structures, it becomes even more critical to demonstrate to potential lenders the entire picture of a deal. In this particular case, we demonstrated the future growth and value potential of the surrounding submarket, as well as the sponsor's overall business plan. Lenders must have a deep understanding of what makes the investment successful in order to ensure that a sponsor's requirements are met.

Buyers will also want to work with mortgage bankers who are willing to go outside of the box and take a creative approach in terms of securing financing that meets their goals. For example, adding to the complexity of this deal, we worked closely with the sponsor and the seller to negotiate an additional $4 million using the sponsor's existing portfolio of income properties as temporary security. The buyer was in the process of selling an existing asset, and this creative solution allowed the sponsor to move forward with the transaction in anticipation of this future sale.

GlobeSt.com: What do you find compelling about the Orange market?

Blashaw: The City of Orange—as well as neighboring Anaheim—is home to many established and recently revitalized destinations and venues including Disneyland, Honda Center, Angel Stadium, Outlets at Orange and Old Towne Orange. Especially with the planned LT Platinum Center development, we will continue to see tremendous revitalization throughout the region. The new development is also anticipated to bring more jobs, residents, and visitors to the area.

Further, with the tightening vacancy for newer, high-image industrial and office buildings in South Orange County and surrounding John Wayne Airport, some investors are looking north and seeing the future value in renovating and repositioning existing properties in Orange.

GlobeSt.com: What else should our readers know about this deal?

Blashaw: Demand is rising throughout Southern California as a whole for industrial and office buildings of older vintage to renovate and reposition. This is particularly true in Orange County where supply is extremely limited. The Orangewood Business Plaza office/industrial complex is a prime example of this, since it was built in 1977 and is in need of refurbishments. The financing we secured on behalf of the buyer will optimize their ability to quickly implement upgrades that will make the complex better suited to tenant needs and increase NOI.

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ORANGE, CA—To secure financing for more complicated structures, it becomes even more critical to demonstrate to potential lenders the entire picture of a deal, MetroGroup Realty Finance VP J.D. Blashaw tells GlobeSt.com. Blashaw and Ivan Kustic from the private commercial-mortgage banking firm based in Newport Beach, CA, recently secured $3.9 million—46% of the purchase price—in permanent acquisition financing for Orangewood Business Plaza, a three-building industrial business park here.

The 49,880-square-foot business park, which is located near Angel Stadium of Anaheim, consists of one office building and two flex/industrial buildings. Blashaw says, “The region surrounding Angel Stadium is undergoing tremendous revitalization, presenting a strong opportunity for long-term value for investors.” He notes that a new $450 million development is planned to be delivered next to the Stadium, which is approximately one-third of a mile from Orangewood Business Plaza. The new development includes a hotel, high-rise office buildings, a variety of retail and entertainment, as well as apartments and condominiums.

We spoke with Blashaw about the strategy behind the structuring of this financing, what is required of buyers and lender sin order to develop these structures and what the firm likes about the Orange market.

GlobeSt.com: What was behind your financing strategy for Orangewood Business Plaza?

Blashaw: Our goal was to structure the financing in a way that would allow our client to benefit fully from the true value potential of the asset and the ongoing revitalization in the region. The buyer was drawn to this asset primarily because of this potential for future value creation. At the time of acquisition, the asset was currently operating with rents that were below market value and was in need of some renovations. The property is also located just under a half mile from a new, $450-million development in the Platinum Triangle near the Angel Stadium of Anaheim. This development will serve as a catalyst for future growth and significantly enhance the value of the sponsor's asset over time.

We structured interest-only payments for the first 18 months of the loan, which would provide increased cash flow near the beginning of the term. This increased cash flow afforded the sponsor with the flexibility to make capital improvements to the asset and bring current rents up to market value, positioning the business park for future growth.

GlobeSt.com: What buyers and lenders need to do in order to for these structures to work?

Blashaw: To secure financing for these more complicated structures, it becomes even more critical to demonstrate to potential lenders the entire picture of a deal. In this particular case, we demonstrated the future growth and value potential of the surrounding submarket, as well as the sponsor's overall business plan. Lenders must have a deep understanding of what makes the investment successful in order to ensure that a sponsor's requirements are met.

Buyers will also want to work with mortgage bankers who are willing to go outside of the box and take a creative approach in terms of securing financing that meets their goals. For example, adding to the complexity of this deal, we worked closely with the sponsor and the seller to negotiate an additional $4 million using the sponsor's existing portfolio of income properties as temporary security. The buyer was in the process of selling an existing asset, and this creative solution allowed the sponsor to move forward with the transaction in anticipation of this future sale.

GlobeSt.com: What do you find compelling about the Orange market?

Blashaw: The City of Orange—as well as neighboring Anaheim—is home to many established and recently revitalized destinations and venues including Disneyland, Honda Center, Angel Stadium, Outlets at Orange and Old Towne Orange. Especially with the planned LT Platinum Center development, we will continue to see tremendous revitalization throughout the region. The new development is also anticipated to bring more jobs, residents, and visitors to the area.

Further, with the tightening vacancy for newer, high-image industrial and office buildings in South Orange County and surrounding John Wayne Airport, some investors are looking north and seeing the future value in renovating and repositioning existing properties in Orange.

GlobeSt.com: What else should our readers know about this deal?

Blashaw: Demand is rising throughout Southern California as a whole for industrial and office buildings of older vintage to renovate and reposition. This is particularly true in Orange County where supply is extremely limited. The Orangewood Business Plaza office/industrial complex is a prime example of this, since it was built in 1977 and is in need of refurbishments. The financing we secured on behalf of the buyer will optimize their ability to quickly implement upgrades that will make the complex better suited to tenant needs and increase NOI.