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WEYMOUTH, MA-Braintree-based Campanelli Cos. has obtained a $16.5-million first mortgage on Weymouth Woods Medical Center, a 68,621-sf medical office building that opened this year, fully preleased, as GlobeSt.com previously reported. One of the tenants, Boston-based Harvard Vanguard Medical Associates, occupies 46,000 sf and has an option to request an expansion of the building during its lease term.
Because there was no time line or even a certainty that the tenant would exercise the option, "this transaction was challenging," says Robert Herron, senior managing director of the Boston office of Holliday Fenoglio Fowler LP. On behalf of Campanelli, Herron and Greg LaBine, a director in the same HFF office, arranged the financing through Northbrook, IL-based Allstate Investments LLC.
"Our client wanted long-term, fixed-rate financing, but needed a mechanism to allow for this expansion and would not force them to pay off the debt and potentially incur a significant prepayment penalty," says LaBine. Under the financing package developed between Allstate and HFF, Campanelli has the right to create a separate condominium for the existing building, allowing the expansion to be financed separately by Allstate or a third-party lender in the future.
"We had done this on another transaction in the suburbs, and we like to think it was a creative solution," Herron tells GlobeSt.com. "While there's a strong possibility that Allstate would want to provide construction financing for Weymouth Woods expansion," he explains, "the lender couldn't make a forward commitment.
"In order to obtain future construction funding under a traditional first mortgage structure," he says, "Campanelli would have to pay off the initial mortgage and suffer a very significant penalty. By separating the initial building and an expansion into separate condominiums, the developer can retain this mortgage and obtain separate funding for any additional structure. The expansion would become its own condominium and be released from Allstate's collateral."
The three-story Weymouth Woods building is located at 51 Performance Dr., just off Route 3, less than two miles from South Shore Hospital and about 12 miles south of Boston. The other tenants in the building are SurgiSouth LLC and South Shore Orthopedics LLC.
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