PNC Overcomes a Cloudy Market To Fund Project for Weather Agency
Even having Uncle Sam as a tenant doesn't guarantee a quick construction loan from today's reluctant real estate bankers.
A major project for the National Oceanographic and Atmospheric Administration lurched ahead last month with a $79.5 million construction loan arranged by PNC Financial Corp.
Earlier, the agency signed a 20-year lease agreement with the developers of the project, a partnership of Foulger-Pratt Cos. of Rockville, Md.
"The challenge was in identifying lenders that still had the capacity" to make real estate loans of any quality, said Douglas Danforth Jr., director of PNC corporate finance.
The painstaking search paid off when lenders eventually signed on to provide $22 million more than the deal required.
Many Decline to Participate
Nevertheless, Mr. Danforth said, about four out of five banks approached about taking part in the syndicate had to turn it down, despite blue-chip leases and the success of the developer in the first two phases of the 1.2 million-square-foot project.
Underwriting took about two months instead of the usual four weeks, Mr. Danforth added.
The U.S. government has taken 20-year lease on 498,000 square feet of offices in the building.
The financing helps the agency consolidate offices that are now in 15 different locations.
It also may have opened up a new line of work for PNC. Mr. Danforth said that as a result of the deal, PNC is working on several other financings with U.S. government tenants, including the fourth and final phase of the NOAA project.
His unit won the mandate from Foulger-Pratt Cos., of Rockville, Md., to finance Phase 3 of the developer's Silver Springs Metro Center after competitive bidding last February.
Washington-area banks that had financed Phases 1 and 2 of the project were under pressure to limit their exposure to real estate loans. The developer sought a bid from PNC, which has a loan office in the area.
"We have a capacity to do a limited number of very high quality [deals]," Mr. Danforth said. "Many other banks are under mandate to reduce their exposure to real estate."