Edgemoor's affiliate, Clark Real Estate Advisors, identified a property that was coming to market in an area to likely be positively impacted by the Base Realignment and Closure commission's actions to consolidate many military and government programs onto the Fort Belvoir installation located outside Washington, D.C. The property, at the time of land acquisition, was a petroleum storage tank facility and it had several documented, and many undocumented, contaminated ground and groundwater sites within its boundaries. Many were subject to on-going monitoring and reporting under the guidance of the state environmental resources protection department. The removal of the existing tanks would impact that monitoring and the sale of property bought greater scrutiny of the contaminated sites and thus the need to establish a environmental management plan to address the known and unknown issues before a closing on the site could occur.
Edgemoor negotiated a purchase and sale agreement that allowed for the tank removal and associated clean-up activities and issuance of "no-further-action required" letters relative to contaminated areas while entitlements for the land were obtained. Protections for liabilities occurring after closing were also established in the transaction documents. Edgemoor worked closely with the seller and the regulatory authorities to ensure there was a well defined plan and schedule to receive the No-Further-Action letters in time to close on the project.
Edgemoor brought in an equity partner to help finance the transaction and the partnership agreement included prescribed buy-out provisions that would allow Edgemoor to exit the project. The sale price for Edgemoor's interest was tied to the leasing success of the project. Edgemoor's equity partner decided to include the project in a 1031 exchange program and the timing to achieve the sale of the property to perfect the 1031 exchange substantially reduced the lease-up period for the project.
Expedited leasing to reach a stabilized position was necessary for both the refinancing from a construction loan and for perfecting the 1031 property exchange. Edgemoor ramped up the leasing effort well before the building was completed and secured leases for two credit-worthy tenants and coordinated the tenant build-out to coincide with base building completion. This allowed both the refinancing to go forward and for the equity partner to structure and effect the 1031 property exchange.
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