Hip Hayes Valley Mixed-Use Asset Scores Funding
Financing was secured for a mixed-use circa-1909 building in a well-located urban core position on Franklin Street in the revitalized Hayes Valley.
SAN FRANCISCO—Considered one of the most burgeoning areas in San Francisco, Hayes Valley’s rapid ascent as one of the area’s hippest neighborhoods can be attributed to the vast array of high-end boutiques, restaurants and bars that populate the city plaza. Since the neighborhood’s complete makeover in 1989 and after years of embryonic growth, this once-forgotten neighborhood is now grabbing its share of the spotlight, becoming a boomtown in the process. With the combination of new condominium communities added to the mix, Hayes Valley has become a hot address, according to Compass.
Due to a well-located urban core position in the revitalized Hayes Valley, financing was secured for a mixed-use circa-1909 trophy building located at 131 Franklin St. The 9,580-square-foot freestanding office and retail property also presents an opportunity for vertical development up to 85 feet, further driving its long-term investment potential, notes JM Grimaldi, executive vice president of Continental Partners.
The one-year loan is priced at a rate of 9.75% with a loan-to-value of 60%. The non-recourse bridge loan was secured by Grimaldi and Continental Partners associate Carl Riggins.
“Despite the strong fundamentals and potential of the asset, the borrower, an owner-user who recently retired, was facing a maturity default after a sale to a foreign investor fell through due to factors outside either party’s control,” Grimaldi tells GlobeSt.com. “A major obstacle to securing competitive financing within the required tight timeline was that the asset was vacant, and thus had no in-place cash flow.”
The borrower, who acquired the building nearly 10 years ago, previously occupied a portion of the asset with its financial services business, leased out the additional space at the property, and offered short-term office and event space rentals, according to Riggins.
“Continental Partners was tasked with identifying a lender who understood the situation and was comfortable with the borrower’s business plan to re-tenant the building and potentially secure an SBA loan before pursuing a sale,” Riggins tells GlobeSt.com. “We strategically approached more than a dozen hard money lenders and demonstrated the strong appeal of the asset to investors, tenants and owner-users due to its exceptionally located urban core positioning in a revitalized San Francisco neighborhood, recent renovations and development potential. Further, we facilitated a quick close by finding a lender who was willing to accept an appraisal performed for a different lender, at a rate more than 2% lower.”
According to Riggins, the building has a height of 40 feet.