(Mark Your Calendars: RealShare DISTRESSED ASSETS, May 3-4 in Dallas, TX).
RIVERDALE, MD-Bostonia Partners, based in Boston, is on the lookout for commercial real estate deals to finance. But they won’t settle for just any transaction. Rather, Bostonia, which is the investment banking arm of Bostonia Group, is looking for troubled construction projects that have credit worthy tenants and need long-term take out financing.
If that sounds like a highly-specialized situation, well, it is, but the company has the perfect case study to point to in the Washington, DC area: The recent $71.5 million in leased-back secured notes it placed for the construction-to-permanent financing for the development of the new 268,762-square-foot headquarters for the National Oceanographic & Atmospheric Administration Center for Weather and Climate Prediction.
“That deal was highly customized to the circumstances,” Bostonia managing partner and president Anita P. Molino tells GlobeSt.com. She says the firm pioneered this model (elements of which they have used before), which uses the private-placement market to maximize proceeds. This deal had special circumstances that needed to be taken into account, not the least of which was the original developer’s bankruptcy. “This is the first time we’ve used the model in a short sale.”
The deal was highly structured—not a transaction that is easily boiled down into a 500 word summary. “We simultaneously closed on the purchase of the mortgage note out of receivership and the credit-tenant lease financing,” Molino says--even though the lease didn’t lend itself to a bond-type structure.
The story begins in 2009 with Opus East’s bankruptcy and the stall-out of construction. The mortgage note went into default and was held in receivership. The project restarted last year when Acquest Development LLC took control and cooperated with the receiver to purchase the note from Bank of America.
Bostonia structured the deal as a credit-tenant lease with two tranches of leased-back secured notes. The developer issued these in order to purchase the mortgage note and complete construction of the project.
What was unique about the structure, Molino explains, was the simultaneous closing of the purchase of the first mortgage note and the credit tenant lease financing. Also of interest: the notes were issued in the private-placement market to institutional investors. They are payable from the rental income of the project. “We had to extend the amortization of the bonds beyond the terms of lease with the government to produce the net amount of proceeds needed to accomplish the deal,” she explains. “Only the private placement market is able to deliver that level of proceeds.”
Also key to the project was a placement agent-- Bostonia Global Securities LLC, the broker-dealer arm of Bostonia Group—that was able to explain the complicated structure to investors. “They did a great job explaining the background noise of the bankruptcy and lease structure to the market,” Molino says.
The firm is currently working on other transactions secured by government leases that are not troubled, she says, but Molino is also on the lookout for deals that could replicate the NOAA transaction.
The new NOAA Center for Weather and Climate Prediction is located in the University of Maryland’s M-Square research park. The building will house 800 people. It is expected to deliver next month.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
