The Real Deal New York

NY construction company gets into real estate finance and sale-leaseback business

November 06, 2009 03:22PM
By David Jones

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Structure Tone, one of the nation’s leading construction management firms, is partnering with Corporate Lease Properties to finance new real estate projects or sale-leaseback deals.

Structure Tone officials said the venture will allow it to provide alternative financing to corporations leasing space to strong creditworthy tenants, and therefore help move projects along that require new construction financing or just enough money to build out space for a new tenant. Officials declined to comment on any specific deals; however, they said they have a number of deals in the pipeline and are focused on deals in Tier 1 cities, including New York, Boston and San Francisco.

“It’s the right time to invest in real estate,” said Brian Donaghy, chairman and president of Structure Tone. “We want to be in a position where we have our platform ready and greased to do deals.”

Structure Tone has managed some of the largest construction projects in New York, including the Bank of America tower and managed tenant build-out projects for Moody’s Corp., MTV Networks and other major companies.

Corporate Lease Properties was founded earlier this year by H. Cabot Lodge III, the founder of ARC Global Partners, a real estate merchant bank since 2006.

Lodge, who previously ran the credit tenant leasing business at iStar Financial, will serve as managing director of the new entity. Lodge is also the former executive vice president at W.P. Carey & Co., a firm that specializes in sale-leaseback deals.

“Companies still need to build or acquire mission critical facilities to remain competitive,” Lodge said in a statement, “and they would rather deploy capital in primary products or services, not in an asset outside of their core business.”

Credit tenant leasing is a way to use sale-leasebacks to finance future real estate deals. In a credit tenant lease, the landlord relies on a strong credit long-term tenant, like an insurance company or pension fund, to use the long-term payment of monthly rent as a type of bond. For example, a pension fund can sell the building to the landlord, and the bank then relies on the monthly rent payments to pay off an acquisition loan used to finance the deal.

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