Replacement Financing Saves the Day for Met Center

Funding was challenging due to structural issues at the Met Center.

AUSTIN, TX—In 2010, the TIC owners of the 256,000-square-foot 15-building Met Center discovered that there was a construction defect at the property. Expansive soils underneath the slab were causing the building to shift.  At the same time, the loan was maturing and lenders were unwilling to refinance the property due to the construction defects. In addition, the owners did not have the financial resources to pay for the $4 million remediation cost. Versant was called upon to design a financing package to maximize returns for the TIC investors. The firm assisted the tenant-in-common investors in successfully recapitalizing by originating new senior debt and preferred equity, overseeing structural remediation and utilizing Internal Revenue Code Section 721 to roll up the TIC structure into an LLC on a tax-deferred basis. “This was a particularly challenging project due to the construction defects and the timing of the lease renewals for Progressive Insurance and Waste Management . Complicating matters further, the bridge lender we selected discontinued their bridge financing line of business two weeks before closing.  Despite this setback we found a replacement lender and closed on schedule,” commented Matt Mueller , president of Versant.  “Without support from the TICs and the efforts of a strong team, this property would have been lost.” With the assistance of Ethan Schelin of Landmark Capital Advisors , Versant originated new debt of $28 million and $4.5 million of preferred equity. Versant tapped its large network of investors to originate the preferred equity and complete the bridge recapitalization. The new sponsor is Virtua Partners, which also provided the loan guarantees. Mueller tells GlobeSt.com: “We reached out to dozens of lenders as we searched for replacement financing. Because of the ongoing construction and short remaining term of the tenant leases, lenders were reluctant to provide financing for the property. However, we were able to overcome those challenges by bringing in a strong sponsor, Virtua Partners, and getting the lender comfortable with our business plan. Market fundamentals in Austin are outstanding, which also helped.” Austin development is abundant. What are the active markets? Who are the key players? Join us at RealShare Austin for market intelligence and the best networking in the biz.