Friday, June 17, 2011

Keystone Property secures $105 million in financing

by Natalie Kostelni

"Keystone Property has completed a $105 million refinancing of its debt on three of its suburban office complexes.

The deal with Deutsche Bank allowed Keystone to switch from short-term floating-rate debt to long-term debt with a fixed rate. The arrangement helps to financially stabilize those buildings. Such financing has been difficult for other commercial property owners who face issues with their loans on their buildings, such as being underwater or in special servicing.

Aside from seeking long-term debt with a fixed rate, the loans on the buildings were set to mature.

The Keystone transaction was challenging; it took nearly a year to put together and finally close. The deal had died at one point, said Matt Pestronk of Ackman-Ziff, who along with Christine Zivkovic, represented Keystone in the negotiations and arranged the financing.

“The market became more aggressive as we were underwriting the deal, and this is one of the more aggressive financings the market has seen in a while,” Pestronk said. “We got aggressive terms.”

The financing, which was part of a tranche in a commercial mortgage-backed securities deal, indicates the lenders are opening to doing big commercial real estate finance deals but continue to be selective with owners outside of New York and Washington.

“For properties that have good cash flow and good sponsorship — someone who is well respected and you can see how they managed when the market was down — there is virtually unlimited money available, Pestronk said.

The transaction was also part of an overall strategy for Keystone to buy properties, redevelop them and not only reposition them with tenants but also financially, said Bill Glazer, CEO of Keystone.

“It’s a little trickier to do these days because the capital markets are extremely disciplined,” Glazer said.

“The last three years were extremely difficult.”

The office properties involved in the transaction were:

One Presidential Blvd., a four-story, 130,804-square-foot building in Bala Cynwyd that is 95 percent occupied.

Valley Forge Park Plaza, a two-building, 155,000-square-foot complex in King of Prussia, that is 92 percent occupied.

Valley Forge Office Center, a four-building complex totaling 250,000 feet in Wayne that is 90 percent occupied.
While Keystone was successful in arranging this financing, Glazer said that money is finally beginning to flow from the CMBS market for new acquisitions, too. Keystone recently closed on an office purchase in Boca Raton, Fla., and is entering that market for the first time. It has four other buildings it is also expecting to close on in the next 60 days.

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