An industrial park is zoned for industrial development, including heavy industries, light industries and warehouses. Assets America® provides commercial construction loans and other industrial real estate loans for industrial parks, industrial buildings, industrial showrooms, data centers, R&D buildings, cold-storage buildings, laboratories, warehouses, distribution centers, plants, and other industrial properties.
Benefits of Industrial Development
The principal benefit of an industrial park is that it clusters together buildings that share specialized zoning, transportation and infrastructure requirements. Land zoned for industrial parks can provide several benefits, including:
- Infrastructure Sharing: Multiple buildings share a common infrastructure, thereby lowering per-building costs. Infrastructure elements include communication cables, electrical lines, gas and water pipelines, and access to roadways, railways, ports and airports.
- Regional and local government support: Many parts of the country offer governmental support to industrial parks in the form of tax breaks, zoning variances, and supporting-infrastructure construction.
- Employee conveniences: Industrial parks offer massive parking facilities and may provide specialized public transportation services. Different businesses may support common amenities, such as health facilities and cafeterias.
- Environmental controls: An industrial park might be able to secure a relaxation of environmental controls that would otherwise choke off business.
Types of Industrial Park Loans
The main industrial loan types are for the acquisition, refinance and construction of industrial parks, industrial buildings and warehouses.
Industrial Park Loans for Acquisitions
It’s not unusual for acquisition deals to involve some rehabilitation and redevelopment of existing properties. Commercial mortgage bridge loans are an excellent vehicle for this purpose, in that they are interest-only and far easier than bank loans to secure. Once the reconstruction is complete, acquirers can pay off the bridge loan with a mini-perm loan to be followed by a final, takeout loan that acts as a long-term mortgage on the industrial property.
Industrial Loan Refinancing
Industrial mini-perm loans have a typical term of up to five years. They are usually refinanced with a takeout loan featuring 30-year amortization at a fixed rate. Existing mortgages can also be refinanced if interest rates fall or if the property owner’s credit improves. Cash-out refinancing frees up investor equity for other uses.
Industrial Construction Loans
Interest-only construction loans and bridge loans typically have terms of up to 18-months. Banks offers the best terms for industrial construction loans but are of course limited to borrowers with good to excellent credit. For many borrowers, bridge loans are a more realistic choice, as they are easier and faster to access. Whereas bank loans are available with interest rates in the 4% to 6% range, bridge loans typically occupy the 9% to 12% range. A revolving construction loan facility provides funding in stages as individual buildings within an industrial park are completed and sold/leased. Construction and bridge loans are eventually replaced by mini-perm and takeout loans.
Warehouse Commercial Loans
One type of industrial property loan is a loan to finance an industrial warehouse building, including construction, acquisition and refinancing. The warehouses are typically Grade B or better, located in an industrial park development. We offer warehouse commercial loans starting at $5M. Our acquisition and refinancing loans are available for stabilized warehouse building properties, with fixed rates for up to 10 years and amortization periods up to 30 years. These loans permit a maximum LTV of 75%, a minimum DSCR of 1.40, and subordinate debt is acceptable. We usually issue warehouse loans for medium to large market sectors but will on a case-by-case basis consider rural projects.
Assets America® uses a variety of funding sources to provide industrial real estate loans.
We work with a trusted network of community, regional and national banks to provide industrial development loans, acquisition loans and loan refinancing. Bank loans are the least expensive but the hardest to get, and it can take months to secure a bank loan.
Private lenders provide an alternative to banks as a source of industrial real estate loans. They include private equity funds, institutional investors, life insurance companies, conduits and commercial lending companies. Private lenders can provide short-term financing, such as bridge loans and hard-money loans, as well as mini-term and take-out loans. The following terms are typical for privately funded industrial property loans:
- Fixed Interest, Non-Recourse Loans
- LTV up to 75% for Acquisition
- LTV up to 90% for Rehab Projects
- Minimum DSCR of 1.25x
- Interest-Only Bridge Loans
- Amortization up to 30 Years
- Available for Refinance, Acquisition and Redevelopment of Industrial Properties
- Industrial Subject Property Acts as Collateral
- Origination Fees of 2% to 4%
Government Financing of Industrial Parks
Local, regional and state governments frequently offer support for the acquisition or construction of land (including soft costs) and buildings for the development industrial parks. They offer flexible repayment terms, below-market interest rates and long-term fixed interest rates. Typically, these government loans cover a portion of eligible costs via a primary mortgage on the project land. Unfunded project costs are financed by bank and/or commercial construction loans.
For example, the Pennsylvania Industrial Development Authority offers industrial real estate loans of up to $2.25M at interest rates 1% to 2% below the industry standard. Origination fees do not exceed 1%. The loans will finance up to 75% of the project, but typically these funds cover a much smaller percentage, since many industrial parks require $20M or more. Assets America® is happy to work with your local development authority to provide the remainder of financing for industrial development projects.
Industrial Loans from Assets America®
Industrial development is a highly complex and specialized undertaking. Assets America® is well-placed to provide you an industrial property loan, including a commercial construction loan, for your industrial development project. We not only have the resources and experience to successfully finance your industrial loan, we have the wisdom to treat each project as unique. This means we always look for ways to say “Yes!” to your funding requirements, even if your credit is less than excellent. We’re ready to satisfy your industrial property loan needs for construction, refinancing and acquisition of industrial park, industrial building and warehouse properties, starting at $5M with virtually no upper limit.
Glossary of Industrial Park Terms
Term Definition Adaptive Reuse The process of converting an old site or infrastructure for a purpose other than its original design Business Park Also called an office park, it should not be confused with an industrial park, as the activity of business parks is commercial rather than industrial Building Envelope Not to be confused with the building envelope for a physical structure, the building envelope for a parcel of land is the maximum three-dimensional space on a zoning lot within which structures are constructed Build-Out The development necessary to make a structure complete and ready to use; development of land to its full capacity Discretionary Review A special power of municipal governments to change or prevent a proposed project even though it complies with local zoning, although it can only be utilized in exceptional circumstances Feeder Roads Roadways that connect the industrial park or business park to major roads Fair Market Value The price that a property would sell for on the open market, given a reasonable understanding of relevant metrics Geographic Information Systems (GIS) Computer-based software to display and interpret geographic and population data High Cube Warehouse An industrial building designed to maximize storage capacity via ceilings of 20 feet or greater and open floorplans Industry 4.0 Also called smart manufacturing or digital manufacturing, the “Fourth Industrial Revolution” incorporates automation, the Internet of Things, and cognitive computing in the manufacturing of products OEM An abbreviation standing for Original Equipment Manufacturer Right to Renew A clause within a lease that gives the lessee the right to renew an existing lease for a specified term, though under very specific conditions
- The World Bank published an brilliant article entitled, Eco-Industrial Parks 2.0: Building a Common Global Framework in its Blog on Private Sector Development.
- You can read more about Industrial Symbiosis and Eco Industrial Parks from the United National Industrial Development Organization or Making Lewes.
- Global Construction Review covers news on international industrial parks, including the article World’s largest industrial park takes shape in Nevada.
Contact Assets America® today at (206) 622-3000 and let’s get started on your industrial park financing!