Red Oak Capital Holdings Provides $4.25 Million Bridge Loan

Red Oak Capital Holdings LLC, a national commercial real estate finance company and Regulation A+ sponsor, has provided a $4.25-million bridge loan for a multi-tenant industrial property in Chicago, Illinois.

The company says the funds will be used to refinance and upgrade the class “B” facility, located at 3850 W. Cortland St. in the North Chicago industrial submarket. The loan was underwritten under Red Oak’s Opportunistic Bridge Program, one of four commercial real estate loan programs the company introduced earlier this year.

“The pullback of traditional capital sources and the lack of liquidity even among alternative lenders has put even more of a chokehold on many property investors, who are now turning to what few lenders remain active in this environment,” says Gary Bechtel, chief executive officer of Red Oak, noting that the firm has seen an increase in the volume of loan requests crossing their desks. “We’re seeing a number of requests relative to the kinds of financing structures and leverage we can provide, which is one of the reasons borrowers and brokers come to us. We have a wide range of products to bring to the table, rather than only seeking out deals that fit the strict requirements of a single bridge program.”

One of four products, Red Oak says the Opportunistic Bridge Program is a “higher-leverage, fixed-rate option for assets with a substantial value-creation component.” The debt for 3850 W. Cortland St. was structured with a note rate of 10.50% and a 12-month term with two 6-month renewal options. The financing represents 66.41% of the asset’s “As-Stabilized” value of $6.40 million.

Situated on a 1.1-acre site, the 92,511-square-foot building was built in 1960 and last renovated in 2019. The property contains 37,249 square feet of office space, 12’ to 22’ clear ceiling heights, four dock-high doors, and six at-grade drive-in doors.

Having acquired the asset in late 2019 for nearly $3.7 million, the borrower plans to use part of the debt proceeds to pay off a matured loan. The balance will go toward CapEx improvements as well as leasing commissions and tenant improvements to stabilize the property prior to an exit via a sale or permanent loan.

“Our decision to make this loan was based on our confidence in the sponsor’s proven business plan and in the broader dynamics of the Chicago industrial market,” said Stratos Athanassiades, Red Oak’s regional manager, Midwest. “Metro vacancy rates remain below 4% and rents continue to rise despite slight softness in the market of late. Though new construction will add to the weakness in the short term, the lack of financing will curtail additional deliveries, bolstering our bullish outlook on Chicago.”

Red Oak says the sponsor, Michael Goldstein of Chicago Property Investors LLC, has a 40-year history of purchasing large single-tenant buildings and converting and rehabbing them into multi-tenant spaces. He has amassed a portfolio of some 70 commercial properties in the Greater Chicago region, including the former 1.2-million-square-foot Brach’s Candy factory and 1.2 million square feet of former Unilever buildings that were later sold to Menards and Walmart.

Red Oak Capital Holdings is a group of commercial real estate capital entities that lends and invests on commercial real estate, raising capital through retail and institutional channels. The firm has more than $400 million of assets under management and commitments from both retail and institutional investors.

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