Waterbridge Capital, Continental Equities Seeking $500M Loan for LA’s Museum Building

The property is being transformed into a state-of-the-art retail, hospitality and creative office destination in downtown L.A.'s Historic Core

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Waterbridge Capital and Continental Equities are seeking up to $500 million in floating-rate, interest-only financing for their redevelopment of The Museum Building—a 1.1-million-square-foot mixed-use project at 801 South Broadway in Downtown Los Angeles—sources close to the transaction told Commercial Observer.

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The debt will refinance a $165 million predevelopment loan on the landmarked property, provided by Jamestown in June 2016, and also fund construction costs, tenant improvements and leasing commissions.

CBRE Capital Markets James MillonTom Traynor and Jesse Zarouk are arranging the $500 million financing, a deal memorandum shared with CO shows. Officials at CBRE declined to confirm or comment on the transaction.

The property—constructed in 1912 and formerly known as the Broadway Trade Center—previously served as a department store, but is now being redeveloped into a state-of-the-art mixed-use property in Downtown L.A.’s Historic Core.

When completed, the project will comprise 470,000 square feet of office space, 298,000 square feet of retail and a 117,000-square-foot hotel. The sponsors are said to be currently reviewing various proposals from hotel operators to run that component of the project.

Waterbridge Capital and Continental Equities acquired the property in 2014 and have spent the last two years in the predevelopment stage, getting landmark approvals and putting a construction budget in place. Now, it’s go-time.

Term sheets are due at the end of March, and the deal is expected to close in May.

“An opportunity like this is going to receive a ton of interest from lenders, given the size and uniqueness of the project, and the fact that it’s likely going to go to the balance sheet world where there’s still a chance to get that little bit of premium relative to some of other deals that are currently getting priced out there,” one source familiar with the financing opportunity said.

A balance sheet execution makes the most sense because the building is undergoing an 18-month renovation prior to stabilization, the source explained, adding that—for a trophy property such as this—he expects that both banks and the larger debt funds will compete pretty fiercely.

Downtown L.A. is in the middle of a major tech resurgence, and the property is already receiving significant creative tenant interest in addition to lender interest, a source familiar with the property said. “You can’t replace or replicate these buildings. The retail component has 25-foot ceilings and the office has 20-foot ceilings. Tenants—especially the Spotifys, and Yahoos of the world—they want the exposed brick and 114,000-square-foot open floor plans. This property offers that,” the source added.

The building also boasts a 2.75-acre rooftop and is one of only two properties in Downtown L.A. permitted to utilize the space, sources said. And use it, they will; the development will feature rooftop restaurants and amenities, including a pool.

“The good thing about L.A. is that you can use the rooftop 365 days of the year, it’s not like Soho House in New York where you’re using it maybe seven months of the year. So, this is a big revenue generator,” one source commented.

Downtown L.A. is becoming an increasingly 24/7, live-work-play environment, with 20,000 multifamily units on the way and retailers including Whole Foods, Apple, Nike, Shake Shack and Sweetgreen leasing spaces immediately around The Museum Building.

Officials at Waterbridge Capital declined to comment.  Officials at Continental Equities could not immediately be reached for comment.