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NEW YORK CITY-The Boston and New York City offices of Holliday Fenoglio Fowler LP have arranged a $960-million-loan for a portfolio of 34 single-tenant office, R&D and industrial properties on behalf of locally-based iStar Financial Inc. HFF directors Janet Krolman and Greg LaBine and executive managing director John Fowler worked exclusively on behalf of the borrower to secure the adjustable-rate, interest only, cross-collateralized and cross-defaulted loan with GE Real Estate. The 34-property portfolio is located in 12 states with a strong concentration on both coasts, a GE spokesperson tells GlobeSt.com.


The portfolio is currently 99.6% occupied with an average lease term of 9.2 years. Nearly half of the approximately 11.9-million-sf portfolio is leased to tenants who are rated investment grade. An HFF spokesperson tells GlobeSt.com that “this just closed,” however she could not specify anything further and could not discuss the location of the properties at this time. She also could not say who the portfolio was purchased from, noting “we did not handle the sale.”


iStar representatives did not respond to GlobeSt.com queries by deadline, however in the company’s first quarter 2008 results, which was issued only days ago, the firm says that the transaction represented $1.1 billion of net book value and an appraised value of $1.6 billion. The company has received approximately $810 million of proceeds from the initial closing of the financing and expects to receive the balance–$150 million–of the proceeds prior to the end of the second quarter, subject to the satisfaction of customary real estate closing conditions. The three-year financing is pre-payable in 20 months. “We used the initial proceeds together with other available corporate funds, to repay the remaining balance on the interim Fremont facility,” the firm says.

HFF’s Krolman says that “historically, iStar would have obtained financing on an unsecured basis by utilizing the company’s BBB, investment grade credit rating. However, the current market conditions are such that it was more efficient and cost effective to finance a subset of their existing single tenant portfolio on a secured basis.”

LaBine adds that “there were a number of ways to accomplish this including putting together a club deal to finance the portfolio, splitting the portfolio into smaller sub-portfolios or financing the whole portfolio with one source.


“iStar concluded that a one-stop-shop alternative with GE was the best fit for their needs, as it was a simpler, cost-effective alternative that was accomplished in a very short time frame,” Fowler said.

Jay Sugarman, chairman and CEO of iStar, says in a prepared statement that “we were looking for a financing partner for this important transaction who we could rely on for timely and dependable execution. With the financial flexibility GE Real Estate was able to provide, we were able to close the transaction in less than 45 days, helping to better position iStar longer-term and enabling us to begin taking advantage of the new, more attractive lending environment.”


This financing for iStar represents the largest debt deal of 2008 for GE Real Estate. It is also the largest loan originated by the company in the past several years, according to a prepared GE statement.

“While sizeable, this is a relatively conservative transaction, well-margined and secured by a geographically-diverse portfolio of single-tenant properties. Almost half the tenants are rated investment grade,” says Alec Burger, president of GE Real Estate’s North America Lending division. “We’ve known the management of iStar for several years and are confident they will use this financing to build a strong platform for the future. We see this as the first of many deals together.”

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