August 2, 2017— Los Angeles-based property owner and operator Olive Hill Group has obtained $41 million in fixed-rate refinancing for its Courtyard at Culver Pointe, a Class-A creative office campus in the rapidly growing Culver City submarket of Silicon Beach. The financing was arranged by Principal Andy Bratt and Vice President Amit Tyagi of Newmark Realty Capital, Inc.
Headed by real estate lawyers Michael Cho and Tim Lee, Olive Hill Group acquired the office buildings for $65.6 million in May 2016 and recently launched a major redevelopment and rebranding of the property to The Courtyard at Culver Pointe. The redevelopment will include upgraded seating areas throughout the courtyard, food truck loading zones, a bocce ball court, and a new on-site gym facility, among others.
“Our investment thesis is to add value to our creative office developments to ensure long-term value upside,” says Tim Lee, Vice President of Corporate Development and Legal Affairs. “As long-term holders with a fully-integrated, in-house property development and management platform, we focus on driving revenue through strategic leasing, renovations, hands-on management and a balanced curation of tenants at each of our properties. During our first year of ownership, we successfully attracted high-quality creative and technology tenants at competitive rents, resulting in increased net operating income and significant additional value.”
Since acquisition, Olive Hill Group has added Ipsos Insight, a global market research and consulting firm, and Omnia Media, a subsidiary of the Canadian company Blue Ant Media. Existing tenants include DataScience Inc., Paychex and Shiseido Cosmetics, among others.
“The Courtyard at Culver Pointe’s prime location, strong occupancy, and quality tenant mix made this an attractive property to finance,” explains Newmark’s Amit Tyagi. “The challenge, however, was identifying a lender that understood the asset’s long-term investment potential. Lenders typically look for consistency in historical operating statements and had initial reservations with the recent ramp up in net operating income.”
To combat this challenge, Newmark Realty Capital, together with Olive Hill Group, leveraged their local market expertise to prove that the current rent levels were sustainable and on-par with market values. In addition, Newmark Realty Capital prepared a pro-forma outlook and provided a number of rental comps to justify the projected rents that the property would achieve upon completion of the extensive renovations.
By demonstrating the upward trajectory of rent growth at the property, Olive Hill Group was also able to structure an earn-out, allowing up to $10 million in additional funding as certain net operating income thresholds are met.
Lee confirms, “By repositioning this property into a creative office campus with on-site amenities that foster creativity and collaboration, we plan to attract additional creative tenants, increase cash flow and net operating income, and ultimately drive long-term value for this asset. This financing will position us to be long-term holders of this property, and reflects our ongoing commitment to the Courtyard at Culver Pointe.”
Olive Hill Group obtained the $41 million loan through a life insurance company represented by Newmark Realty Capital. The ten-year loan was structured with a seven-year, interest-only period, followed by an amortization of 30 years.
Counsel for the borrower were David Larsen & Beth Understahl of Perkins Coie, LLP.
The property is located at 200-300 Corporate Pointe in Culver City, California.