Red Oak provided $1,733,750 in financing to purchase and rehabilitate a three-story 40,000-square-foot office building located in Homewood, AL in the Birmingham market. The property at 85 Bagby Dr.is a multi-tenant general use office, located just off Hwy I-65 in the market’s CBD. The buyer is an experienced property developer and manager. The building was 80% occupied and will undergo regular updating and renovations to bring it up to a Class A/B building. The borrower expects occupancy to hit 100% withing six months. The site is located directly across the street from a new $21-million public safety building, which will house all public safety departments. Conventional financing was not available for the property as a result of maintenance and upgrades needed, as well as the high vacancy. Red Oak understood that the asset performance however was strong, with a net operating income of $243,541 and an expected DSCR of 1.25. The borrower’s exit strategy is to obtain conventional financing after the rehabilitation and stabilization is completed, in approximately 6 to 8 months.
OPPORTUNITY The Sponsor and its investment company recognized an opportunity to acquire a mismanaged and poorly maintained office park in a suburban Southeast market, adding value through targeted capital improvements, leasing and stabilization of the asset. Occupancy levels at the time of purchase were well below the submarket averages due to the seller’s tough stance […]