Life Insurance Company
Cherry Tower is a 16-story, multi-tenant office building located in Denver's Glendale submarket. The iconic high-rise office property was constructed in 1982 (renovated in 2010), provides users with unparalleled views to the west, and has an attached parking garage that provides a rare amenity for the office users in the submarket. Cherry Tower consists of 220,000 square feet and was 90% occupied at the time of this transaction.
Essex's client was under contract to acquire Cherry Tower for $22.5 million and needed an additional $5 million for capital repairs, tenant improvements, and leasing commissions. The business plan was to acquire the asset at a strong basis in an improving market, invest capital into the parking garage and common area facilities, roll leases to market rents (up to $5/SF higher than in-place rents), and sell the asset upon stabilization and completion of the business plan. The ideal holding period was for 3-5 years.
Essex recognized a unique opportunity for potential capital partners given the location, market demand, and expertise of the Borrower. Essex identified pre-qualified capital sources that had programs that met the Borrower's objectives, and crafted an A/B financing structure that met the investors’ needs. Essex created 5-year A/B structure with a relationship life insurance company that financed 90% of the total project cost. The 75% A-Note carried an interest rate of 4.9%, while the 15% B-Note carried an interest rate of 7.5% and had a small profit participation in the valuation creation above the cost basis.