Octagon Finance Lends $68M on Virginia Office-to-Resi Conversion

A joint venture between development company Kalyan Hospitality and investment firm RPC Capital has sealed $68 million of construction financing to execute an office-to-residential conversion project in Richmond, Va., that includes tax credits for historic rehabilitation, Commercial Observer has learned.

Octagon Finance provided the unitranche bridge loan backing the real estate of the sponsorship’s project at 801 East Main Street in Downtown Richmond and historic rehabilitation tax credits the property is receiving. The sponsorship plans to transform the former office building into 301 apartments with 8,500 square feet of ground-floor retail space for the Altitude on Main project.

Udi Kore, managing partner at Octagon Finance, said the 1965-built property qualifies for historic rehabilitation tax credits because of its location in a historic district in Richmond that is two blocks from Virginia’s state capital building. Kore said the tax credits program, conceived in the 1970s as a private capital tool for repurposing dilapidated manufacturing facilities, now can play an integral role aiding developers with converting older office buildings.

“It’s a very useful product for them, and for us it’s a great loan because it’s backed not only by the real estate but more importantly also covered by the credits,” Kore said of the advantage of having one lender originate a loan for the property and the historic tax credits. “It’s a complicated legal structure for tax credits, so we really resolve the huge issues for them and enable the project to get going.”

The Altitude on Main development will feature 366 parking spaces. Community amenities will include a fitness center, a clubroom, a rooftop patio, indoor pickleball courts and a golf simulator. 

Officials at Kalyan Hospitality and RPC Capital did not immediately return requests for comment.

Andrew Coen can be reached at acoen@commercialobserver.com