Large Office Conversion in Old Town Alexandria Scores $88M
Bank OZK and Mesa West lend senior and mezzanine loans.
By Andrew Coen March 13, 2024 5:57 pm
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American Real Estate Partners (AREP) has sealed an $87.9 million debt package to facilitate an office-to-residential conversion project in Old Town Alexandria, Va., with a bank and debt fund teaming up in the capital stack.
Bank OZK (OZK) supplied a $61.8 million first-mortgage construction loan on AREP’s planned repurposing of a former office building at 1101 King Street into multifamily housing. The senior financing represents 47.5 percent loan-to-cost, according to the lender.
Funds managed by Mesa West also provided a five-year, interest-only $26.1 million mezzanine loan for the development, which sits in the heart of the historic district in Alexandria, about eight miles south of Washington, D.C.
McLean, Va.-based AREP plans to reposition the 1984-built office building as City House Old Town featuring at least 200 apartments ranging in size from one to three bedrooms. Resident amenities will include a courtyard garden, rooftop deck, lobby lounge, private club suite, fitness center, pet spa and concierge services.
AREP broke ground on the conversion project last month, with completion slated for fall 2025.
The developer, along with joint venture partner Silverpeak Real Estate Partners, acquired units in the office condominium building in September 2022 when the property was around 80 percent vacant, according to the Washington Business Journal.
“The transaction presented an opportunity to originate a moderate-leverage mezzanine loan on a multifamily property located in the high barrier to entry market of Old Town Alexandria,” Mesa West Executive Director Matt Snyder said in a statement. “This has created a huge supply/demand imbalance for renters who want to take advantage of the neighborhood’s historic charm, strong retail amenity base and easy commute to Washington, D.C., and the area’s other major employment hubs.”
Newmark (NMRK)’s Joe Donato, Kevin Ridgway and Andrew Gaffney arranged the financing.
Officials at Bank OZK weren’t available for comment. AREP officials did not immediately return requests for comment.
Andrew Coen can be reached at acoen@commercialobserver.com
