Case Study: $7MM+ Bridge Loan at SOFR + 200-250 for Industrial Acquisition in Asheville MSA

At a Glance

*Approximate figures

Overview

Valencia Realty Capital (“VRC”) was engaged by an existing sponsor relationship to source senior financing for the acquisition and repositioning of a 150,000± SQFT single-tenant industrial building located in the Asheville MSA

The sponsor sought a modestly leveraged, bank-executed mini-perm loan offering the flexibility to complete capital improvements and future tenant buildouts following the expiration of the in-place lease. While the property provided strong in-place cash flow and was acquired at a compelling basis, the near-term lease rollover required a lender capable of underwriting both the stability of current income and the sponsor’s ability to re-tenant the asset.

Having collaborated with VRC on previous transactions, the sponsorship once again turned to VRC for strategic capital markets guidance and to manage a competitive debt sourcing process focused on limited-recourse bank execution.

The Challenge

Although the investment featured solid fundamentals including strong day-one cash flow, below-market rents, and an attractive acquisition basis, several factors limited lender appetite:

• Near-term lease expiration in a tertiary market
• Desire for limited-recourse execution at bank-level pricing
• Sub-institutional check size (limiting national lender interest)
• Active tenant negotiations requiring scenario-based underwriting during the closing process

While overall banking activity had improved relative to 24 months prior, the combination of near-term rollover risk and a request for limited recourse caused many lenders to pass. The sponsor needed a financing partner that understood the submarket dynamics and could underwrite to both the sponsor’s track record and financial strength.

The Capital Stack Solution

VRC conducted a highly targeted marketing process that included both regional banks and private lenders offering bank-competitive terms. Through this effort, VRC identified a regional bank with recent lending exposure in the immediate market, providing valuable real-time data on rent comps, absorption trends, and demand drivers.

This lender recognized the constrained supply dynamics of the Asheville-area industrial sector and was familiar with the sponsor’s existing ownership in the market, which strengthened the credit profile. Importantly, the lender demonstrated a willingness to structure creatively:

While the bank’s initial proposal required full recourse, VRC negotiated a structure whereby the bank reduced recourse exposure by leveraging the stability of the in-place tenant’s cash flows and the sponsor’s proven leasing track record.

Below is an outline of example terms of the overall facility that was offered by the lender. (** Actual deal terms are not being outlined to preserve client confidentiality).

• Proceeds: $7,000,000+ (includes the acquisition, Capex, and TI/LC Allocation)
• LTC: 65%
• Cost of Capital: SOFR + 200 – 250 (fixed)
• Lender Points: 50%
• Recourse: 50% Principal Recourse Guarantee
• Term: 5 Years
• I/O Period: 3 Years
• Amortization: 25 Years
• Timeframe to Term Sheet: 3 Weeks
• Timeframe to Close: 60 days from term sheet signing

Due to both the strong return profile, a sponsorship that VRC had transacted with multiple times, and a well-known market familiar to both Valencia and the sponsor, VRC co-invested into the LP of the deal to finalize the capital raise for the sponsorship.

VRC’s Role

VRC’s involvement extended well beyond lender introductions. Our team:

• Conducted detailed scenario analyses around lease rollover and re-tenanting assumptions
• Crafted and positioned the financing request to highlight both the sponsor’s strengths and the asset’s value-add potential
• Delivered multiple debt options, enabling the sponsor and their investors to select the optimal risk-adjusted solution
• Coordinated lender and sponsor communication throughout the underwriting and closing process, ensuring an efficient, streamlined process
• Co-invested in the limited partnership

Ultimately, VRC facilitated a flexible, limited-recourse financing solution that met the sponsor’s timeline, balanced lender concerns, and positioned the project for successful execution and long-term value creation.

This transaction underscores VRC’s ability to combine market intelligence, lender relationships, and disciplined process management to achieve optimal outcomes for sponsors. By staying creative yet pragmatic, VRC continues to deliver capital solutions tailored to the evolving needs of middle-market real estate entrepreneurs.

If capital of this nature may be of interest, book a call to discuss a potential capital arrangement.

Read our last Case Study: $45MM+ Non-recourse Construction Loan for Massachusetts Historic Office to Multifamily Conversion

Disclaimer: This article is written as a “high-level” overview to illustrate a real-life deal example for educational purposes only. In order to preserve the confidentiality of the Parties involved in this transaction, some identifiable information has been modified slightly including approximations of financial figures. Please do not construe this article as legal, tax or financial advice. As all situations are unique and nuanced, be sure to seek the counsel of qualified professionals before making any investment or financial decisions.