Douglas Taps United Bank, EB-5 To Finance Spec Office Project

A veteran Washington, D.C., developer has raised financing for a speculative office building project near Fords Theater with a $44.5 million construction loan and $9 million obtained through a federal program that allots visas to foreigners who invest in U.S. development projects.

Douglas Development Corp. has already started building the 93,000 square foot tower at 1000 F Street. The building is considered speculative because Douglas is moving ahead with very little preleasing. So far, it has done only one deal, with American Eagle Outfitters for the buildings retail space.

But Douglas, which has extensive experience with projects in that neighborhood, is betting it will have little trouble filling the space with nonprofit agencies, government affairs offices of major corporations and other tenants, says Norman Jamal, a principal with the firm. Many of the tenants are likely to be in the 6,500 square foot to 10,000 square foot range. Those folks dont typically prelease, Mr. Jamal said.

Construction financing for speculative projects remains difficult to obtain these days, even though the commercial real estate market has been steadily recovering. Still, Douglas got a $44.5 million three-year construction loan from United Bank of West Virginia with a rate of 4% and two one-year extension options.

Douglas was able to pull it off partly because the developer has worked with the bank in the past, according to Joe Donato, who led a team from NGKF Capital Markets that arranged the construction financing. Also, he said: Douglas has a tremendous presence in Washington.

Douglas also sold $9 million in preferred equity to foreigners participating in the so-called EB-5 program. Started 24 years ago, the program gives U.S. visas to people who invest at least $500,000 in development projects that create a specified number of jobs.

Mr. Jamal said holders of the preferred equity will be paid an interest rate of below 5%, which he described as extremely inexpensive for the developer. This was the first time that Douglas raised financing through the EB-5 program, but probably not last. Were actually working on another project right now that were planning to use EB-5 on, he said.

Douglas, which currently manages 9 million square feet of space, plans to finish the 11-story building at 1000 F Street in the third quarter of 2016.

More here:
Douglas Taps United Bank, EB-5 To Finance Spec Office Project