By Jon Peterson
There is a $92 million mixed-use development project in Palo Alto that will be delivered to the market this summer. One part of the financial backing for the project is a $17.3 million preferred equity investment contributed by Chicago-based Pearlmark.
“The kind of structure that we used on our investment will allow the developer to minimize their equity investment in the project,” says Bill Swackhamer, a managing director for Pearlmark. He works out of the company’s regional office in Denver and arranged the transaction for the company.
The developer of the project is Greystone and its joint venture partner, the Clara E. Chilcote Trust. The development is known as College Terrace Centre located at 2100 El Camino Real. Construction financing on the development is being provided by J.P. Morgan Chase.
The project totals 65,000 square feet. The largest part of the development is a 45,000 square foot office building. “All of this space has been pre-leased to a bank for the next 10 years,” said Swackhamer. He declined to give the name of the tenant. The other components of the project are around 13,000 square feet of street-level retail, eight affordable housing units and 227 parking spaces.
Pearlmark believes there were several factors for investing in this project. “We were highly motivated to invest in College Terrace Centre for numerous reasons, including strong sponsorship from Greystone, preleasing of the office component to a credit tenant, and the attractive real estate fundamentals that exist in Palo Alto,” said Swackhamer in a prepared statement.
Pearlmark made its investment in the project using two capital sources. These were the Pearlmark Mezzanine Realty Partners IV and a separate account client.
Pearlmark is planning a total capital raise of $300 million to $500 million for Mezz Fund IV. The commingled fund will be investing in a variety of commercial real estate assets around the country. The capital would be used for a mixture of refinancings, recapitalizations, acquisitions of existing properties and selective development projects.
The commingled fund will seek to generate net IRR returns in the range of 10 percent to 12 percent. The investments will typically have a three- to five-year holding period.