PUYALLUP, WA—As with the Seattle metro as a whole, the local market has experienced significant economic and population growth in recent years, underscoring the need for quality retail. One redevelopment project is nearing completion but required a quick bridge loan in the process.

The $16 million non-recourse bridge loan for Net Lease Alliance will be used to complete the construction of the 125,100-square-foot retail center. The project involves the redevelopment of a former big-box store that is 100% pre-leased to 24 Hour Fitness and At Home, a publicly traded home décor retail chain.

“The tenants' retail segments–fitness and home décor–are benefitting from a steady period of growth fueled by a strong demand,” Joseph Maehler, senior vice president, Buchanan Street Partners, tells GlobeSt.com. “The property is leased for 10 years to 24 Hour Fitness, with more than 4 million members across 13 states, and At Home, with 164 stores in 35 states. At Home is one of the fastest-growing retailers in America and this will be the first store the chain opens in the Pacific Northwest. Fitness clubs and home décor stores are outperforming other retail center tenants as they seem to be more resistant to shifts stemming from the rapid growth of e-commerce.”

The property is located at 301 37th Ave. SE, 10 miles east of Tacoma and 35 miles south of Seattle. This is at the intersection of three major highways and a top boarding location for local commuter rail service.

Buchanan Street Partners closed the loan in two weeks to enable the timely completion of the project and meet tenant commencement dates. Target Rock Partners represented Net Lease Alliance in the transaction.

“Buchanan Street's ability to quickly fund the bridge loan was critical for the borrower to maintain delivery timelines and meet tenant lease commencement dates in fourth quarter 2018 and first quarter 2019,” Maehler tells GlobeSt.com.

While lenders are typically reticent to finance a construction project midstream, Buchanan found the merits of this transaction compelling, Maehler explains.

“Buchanan Street's loan is backed by an experienced reputable sponsor, a high-quality asset, strong market fundamentals and an attractive risk-adjusted return,” he says. “Net Lease Alliance relied on our extensive construction lending experience to understand the project's scope and move quickly to craft a financial solution for a complex deal involving a Washington property, an Alabama sponsor, a California lender and a New York broker.”

As of third quarter, Puget Sound retail rental rates were $20.21 price per square foot, with a 3.4% vacancy rate and 667,665 year-to-date absorption, according to NAI Puget Sound Properties.

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