Waterway Family Funds announces the acquisition of a mixed-use property in Brunswick, ME.

WYSIWYG

Waterway Family Funds, LLC (“Waterway”) is pleased to announce the recent acquisition of a mixed-use development serving the Town  of Brunswick, ME.  Anchoring downtown Brunswick, the property is  directly adjacent to the BRK Amtrak Station and Bowdoin College.  The property, consisting of 24 Class A apartment units and over  40,000 SF of commercial space, was 100% occupied at the time of  acquisition. The commercial rent roll features a diverse tenanting  mix of medical office, government office and tenant friendly retail.  Waterway acquired the project in a joint venture with Norwegian  Bay Capital. Mechanics Savings, a division of Maine Community  Bank, provided the acquisition financing.

Brunswick, ME is a well established community that continues to benefit from the regional affordability, which has driven in-migration, record leasing activity and the strengthening of market  fundamentals.

The Property is immediately served by the BRK Amtrak Station, is  directly adjacent to Bowdoin College (consistently ranked among the  top Liberal Arts colleges in the country), and maintains central location to grocery anchored retail developments, Town Hall, and Main Street. Directly accessible to I-295 Brunswick is a 30-minute  drive to downtown Portland. Several large employers in the area  provide a strong economic base including LL Bean, Bowdoin College, Mid Coast hospital, Bath Iron Works, Wayfair, and Owens Corning.

Waterway Family Funds, an affiliate of Waterway Capital, has closed on its acquisition of 450 Post Road East, a 35,777 square foot Class A office building in Westport, CT. It is currently 100 percent leased by two tenants, including Wells Fargo Advisors.  450 Post Road is located on the Post Road/Route 1 east-to-west corridor less than a mile from the many office, retail and dining options in the downtown area. Located in one of the most affluent communities in the U.S., 450 Post Road benefits from major financial and money management firms’ desire to have an office presence in Westport. This acquisition is less than a mile from, and is complementary to, Waterway’s flagship office property located at 8 & 10 Wright Street.

Waterway Family Funds is an affiliate of Waterway Capital, a FINRA/SEC registered broker dealer and investment bank specializing in lease-backed structured finance. Waterway Family Funds partners with developers, owners, and corporate clients to invest in creditworthy real estate. Drawing on our extensive experience managing private equity funds, we manage the entire investment process.

Credit Tenant Loan (CTL) Financing Continues to be an Attractive Way to Finance Resilient Single-Tenant Assets

As demand for single-tenant, triple-net commercial properties is on the rise, particularly for retail and industrial properties with tenants that provide or supply essential goods and services, CTL lending continues to be an attractive way to finance the acquisition and development of such properties.

Despite COVID-related turbulence and recent volatility in the capital markets, CTL financing has proven to be an available and attractive way to finance single-tenant properties.  While traditional lending sources are tightening underwriting guidelines and scaling back on leverage, CTL lenders (which are focused on credit rather than real estate fundamentals) continue to have a strong appetite for new loans, offering comparatively high leverage (up to 100% loan-to-value) for longer leases and relatively low interest rates, keeping in line with the compressed yield levels for corporate bonds (see Chart I).

With interest rates hovering around historic lows, now is the time to lock in long-term financing for properties that meet CTL criteria, namely existing or to-be-built single-tenant properties that have long-term leases with investment-grade tenants.  In cases where lease terms have fewer than 15 years remaining, landlords should consider negotiating lease extensions or nudging tenants to exercise extension options to take advantage of the CTL debt currently available in the capital markets.

Although there appears to be a slight preference for A-rated tenants or better, there is still strong demand for CTLs with tenants across the investment-grade spectrum. Interestingly but perhaps not surprisingly, the vast majority of U.S. corporate companies that were investment grade before the pandemic maintained their investment-grade ratings by the end of the first quarter, according to a recent report by Standard & Poor’s. By and large, companies that were downgraded in the first quarter were already sub-investment grade to begin with (see Chart II).

In the first half of 2020, Waterway Capital closed CTL transactions for existing and to-be-built properties leased to tenants in the retail, industrial, health care, energy and municipal sectors.  We are committed to helping our clients navigate the commercial real estate lending landscape in light of these extraordinary times.

Some information contained herein has been obtained form sources to be reliable but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions expressed are subject to change without notice. It should not be assumed that any historical market performance information discussed herein will equal such future performance. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Waterway Capital LLC is a FINRA/SEC/MSRB member.

Waterway Capital, LLC finished 2019 on a high note, closing 6 transactions in the month of December. Overall in 2019, Waterway closed just under $1 billion of credit tenant loans, ground lease financings and other lease-backed products. Highlighted below are select transactions from the second half of 2019:

Amazon.com, Inc. – Seattle, WA

$157,391,000

• Debt financing for the leasehold interest in a 317,804 square foot office building
• 5.0-year term / 2.6-year average life
• Located in the South Lake Union neighborhood
• Structure included a commercial mortgage and a credit tenant loan

New York City Department of Education – New York, NY

$30,705,000

• Debt financing for a 40,000 square foot, six-story school
• 18.8-year term / 11.5-year average life
• 1.11x debt service coverage
• 63.9% loan-to-value ratio
• Structured as a credit tenant loan

Costco Wholesale Corporation – Cherry Hill, NJ

$23,897,000

• Debt financing for a 13.9-acre parcel containing a Costco store and gas facility
• 25.9-year term / 17.9-year average life
• An insured balloon provided additional amortization
• 89.3% loan-to-value ratio
• Structured as a credit tenant loan

Mixed-Use Property – Philadelphia, PA

$18,500,000

• Debt financing secured by the leased fee interest in the land underlying a mixed-use building
• 36.2-year term / 26.8-year average life
• 89.8% loan-to-value ratio
• Structured as a rated ground lease

Industrial Tenant – Houston, TX

$13,378,000

• Debt financing for a seven building industrial site
• 20.0-year term / 11.7-year average life
• 1.07x debt service coverage increasing to 1.58x over the life of the note
• Structured as a forward, allowing interest rate to be locked 11 months prior to funding
• Structured as a credit tenant loan

U.S. Department of Veterans Affairs – Lafayette, IN

$9,392,744

• Debt financing of a to-be-built community-based outpatient clinic
• A1 / A2 structure to accommodate the funding of tenant improvements
• 1.05x debt service coverage
• 77.3% loan-to-value ratio
• Structured as a credit tenant loan

Bank of America Corporation – Houston, TX

$7,650,000

• Debt financing of a one-story bank branch
• 10.3-year term / 7.7-year average life
• An insured balloon provided additional amortization
• Loan-to-value less than 50%
• 1.79x debt service coverage
• Structured as a credit tenant loan

Building on $9 billion in transaction volume over the past decade, Waterway Capital in 2019 closed on multiple transactions spanning a broad range of real estate projects, including municipal, mixed-use, build-suit and to-be-built properties in the United States and Canada. Waterway acted as the placement agent for all of the transactions, including several credit-tenant loans.

Waterway Capital’s structured private placement solutions span a broad range of opportunities, and are designed in partnership with commercial real estate developers, investment firms and owners. Recent transactions include:

L3 Technologies, Inc.

Waterway Capital acted as the placement agent for the debt financing of a to-be-built four-story multi-use building consisting of approximately 330,000 rentable square feet on a 17.82 acre parcel of land in Hamilton, Ontario.

C$137,300,000 – Credit Tenant Loan

May 2019

FedEx Ground Package System, Inc.

Waterway Capital acted as the placement agent for the financing of a newly constructed 371,778 square foot build-to-suit distribution facility situated on a 32-acre parcel located in Quincy, Massachusetts.

$80,309,000 – Senior Secured Note

March 2019

County of Fresno, California

Waterway Capital acted as the placement agent for the financing of a two-story, Department of Social Services building containing 21,966 rentable square feet of office space and 87,117 rentable square feet of warehouse space located in Clovis, California.

$80,111,000 – Credit Tenant Loan

April 2019

Aa2 Rated Municipal Tenant

Waterway Capital acted as the placement agent for the debt financing of a to-be-built, three-story municipal office building consisting of 72,000 square feet located on a 7.15-acre parcel of land.

$55,328,000 – Credit Tenant Loan

June 2019

Heritage Manufactured Housing Loan Portfolio

Waterway Capital acted as the placement agent for a loan portfolio to a special purpose entity secured by first priority lien interests in approximately 1,181 specific manufactured housing units in 11 communities located in Florida and South Carolina.

$10,000,000 – Secured Term Loan Transaction

June 2019

County of Tulare, California

Waterway Capital acted as the placement agent for the debt financing of a to-be-built mixed-use building with 43,898 rentable square feet on an approximate .5-acre parcel of land in Porterville, California.

$10,000,000 – Credit Tenant Loan

June 2019