Green Exchange Lands $26.5 Million Refinance Loan

The owners of the Green Exchange, an environmentally focused office building on the Northwest Side, have refinanced the property with a $26.5 million loan, the latest sign of improvement in real estate lending, according to the Chicago Real Estate Daily.

The owners of the Green Exchange, an environmentally focused office building on the Northwest Side, have refinanced the property with a $26.5 million loan, the latest sign of improvement in real estate lending.

A venture of Chicago-based Baum Development LLC borrowed the money in October from an affiliate of New York-based Jefferies Group Inc., property records show. The loan was packaged with other real estate debt and is being sold off in a commercial mortgage-backed securities (CMBS) offering.

After plunging during the bust, investor demand for CMBS debt has bounced back amid low yields on alternative investments. Lenders that specialize in CMBS loans have eased their loan standards, making it easier for landlords like Baum to refinance properties.

“The standards are relaxing versus 2009 and 2010. It’s a good thing,” said Joseph McBride, an analyst at the New York-based financial research firm Trepp LLC.

The Baum venture has used the new debt to pay off an approximately $20 million construction loan it borrowed from a fund managed by New York-based Related Cos., said David Baum, who co-owns the namesake firm with his brother Douglas. The loan will also create a reserve fund for the building.

“It fully funds the entire project,” he said.

The loan also covers an empty, 10,000-square-foot structure at 2601 W. Diversey Ave., next to the Green Exchange, which Baum bought in 2011 for $1.1 million, according to Mr. Baum.

Mr. Baum added that his venture is not taking any money out of the property and plans to hold Green Exchange for the long term.

The property also is encumbered by a $15 million loan guaranteed by the U.S. Department of Housing and Urban Development.

Now 80 percent leased, the property was appraised at $38.2 million last September, according to a Bloomberg L.P. report about the loan, less than the $41.5 million in total debt encumbering the building.

But Neil Freeman, chairman and CEO of Chicago-based Aries Capital LLC, which secured the new loan for the Baum venture, said the “stabilized” value of the Green Exchange is between $50 million and $60 million, a value that accounts for future rents tenants have already agreed to pay.

The Green Exchange’s anchor tenant, freight brokerage Coyote Logistics LLC, for example, leases 145,438 square feet in the building, paying a base rent at underwriting of $25.04 per square foot, says a prospectus given to investors about the debt. But it hasn’t started paying rent on 14,720 square feet, according to the prospectus.

Until then, the Baum venture will use $730,700 from its new reserve fund to cover leasing costs and rental income for that space, according to the loan prospectus. Net cash flow at underwriting was projected at $3.4 million.

Mr. Baum added that he expects to soon close on additional leases that would bring the building to more than 90 percent leased.

Other large tenants in the Green Exchange include a Rainforest Learning Center preschool and a workforce education center run by St. Augustine College. Both tenants have leased about 10,000 square feet, the Bloomberg loan report said.

Source:  “Green Exchange lands $26.5 million refinance loan.” | Chicago Real Estate Daily By: Micah Maidenberg January 09, 2013