Green Exchange Project

SB Friedman completed an underwriting assignment for the City of Chicago evaluating the potential to provide a TIF-backed HUD 108 loan to address a mid-stream financing gap for the Green Exchange Project. These efforts resulted in a restructured financing package that included a $15 million subordinate HUD 108 loan and $20 million in senior Recovery Zone Facility Bonds.

This 227,000-square-foot, $55 million historic rehab of an old lamp factory on the City’s Northwest Side has transformed the building into office, retail, studio, and workshop space for a range of green industries and service businesses.  The building was rehabbed to federal historic standards, and the financing structure includes about $9 million of Historic Tax Credit equity. Green Exchange has also achieved LEED Platinum certification. Its anchor tenant, Coyote Logistics, has located over 1,000 jobs in the building and is growing rapidly.

Our work involved evaluating the potential repayment risks and TIF/HUD 108 loan structure that could allow the City of Chicago to borrow against future CDBG allocations while using TIF proceeds to protect against default risk. The resulting structure included a direct pledge of TIF revenues generated by the project itself, with contingent features that make this pledge the first “safety valve” if cash flow becomes too low to support the HUD 108 Loan. This pledge is internally backed by area-wide TIF revenues from the Addison South TIF, which the City has flexibility to deploy in the event of a significant cash flow shortfall. This structure allows good access to capital and cost of capital, while ensuring that the City’s future CDBG fund availability should not be impacted.

Results: The proposed transaction successfully closed in late 2010, and the project is substantially complete. The anchor tenant occupies the bulk of its space, and is in the process of building out additional expansion area. Many of the small business tenants, including a green caterer and Green Choice Bank, have taken occupancy.