RRA recently provided funding for a transformative deal on an existing warehouse property in Los Angeles, California. The property, a traditional warehouse built in 1989, has now been converted into a dynamic co-working and co-warehousing space.

Spanning an impressive 38,282 square feet on a 1.59-acre site, the flex warehouse property has 18-foot clear heights, 5 loading doors, and approximately 8,400 square feet of unenclosed office mezzanine space. The property was divided into 65 co-warehousing spaces and 37 co-working suites, offering varying sizes of dynamic workspaces. Tenants, referred to as "Members," will enjoy flexible month-to-month revocable licenses, a hallmark of modern co-working concepts.

RRA Capital's non-recourse loan of $8,670,000 incorporates a 36-month interest-only term and two 12-month extension options. A capital improvement holdback facility and reserves for pre-stabilization expenses are included to cover retrofitting and unforeseen costs. Follow-on proceeds cater to the operator's specifications for creating an exceptional co-working/co-warehousing facility.

The loan agreement includes a progressive provision that rewards success. The interest rate spread and floor decrease by 50 basis points once the property's net operating income (NOI) achieves a minimum 9.0% debt yield based on the full loan commitment. This strategic alignment of interests between sponsor and lender fosters long-term financial prosperity.

Based on pro forma projections, the property is expected to achieve a stabilized debt yield of 12.8% and a debt service coverage ratio (DSCR) of 1.74x. These encouraging financial indicators underscore the potential for strong returns and sustainable cash flow, reaffirming the project's viability.

With performance-based incentives and strong projected performance, RRA Capital's involvement and the sponsor's visionary approach contributed to the revitalization of the property, creating a dynamic and flexible workspace for future tenants.