Lease-Up of a Newly Constructed Flex Industrial Building

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Exterior Aerial Warehouse Interior Drive-In & Dock Doors Entrance & Signage Overhead Aerial

THE OPPORTUNITY

A Ground-Up Flex Industrial Building Delivered Debt-Free, with Two Tenants Signed Before the Loan Closed

The story behind 3475 Langley Drive begins before RRA entered it. The sponsor, a private real estate development firm with a track record of ground-up construction projects across multiple property types and markets, broke ground in June 2020 and completed the 64,600 square foot industrial building in January 2021, entirely on an all-cash basis. By the time the sponsor approached RRA, the property was already constructed, already owned free and clear, and already beginning to lease. One tenant had executed a lease covering 17 percent of the building. A second tenant, an aviation company, had signed a letter of intent for another 25,000 square feet, or 39 percent of the rentable area. The loan RRA structured was not acquisition financing. It was a cash-out refinance on a completed, partially occupied asset where the business plan was already in motion.

The location adds a layer of context that matters. Hebron, Kentucky sits approximately three miles west of the Cincinnati/Northern Kentucky International Airport, with Interstate 275 accessible within minutes. Amazon had invested heavily in the immediate area, including a 2.3 million square foot, $1 billion Air Hub development at CVG that was near completion at the time of closing and expected to create more than 2,000 jobs. The surrounding industrial submarket had absorbed significant new supply without a meaningful vacancy increase, as demand driven by e-commerce logistics and airport-adjacent distribution continued to accelerate. The sponsor's choice of site reflected a clear read on where tenant demand was heading.

RRA's role was to provide the certainty of execution and the appropriate capital structure to let the sponsor continue executing. The building was built. The first tenants were signed. The path to stabilization was well-defined.

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THE PROPERTY

64,600 SF Class A Flex Industrial Building on 6.5 Acres, Designed for Multi-Tenant Flexibility with Airport-Adjacent Logistics Access

The property at 3475 Langley Drive was completed in early 2021 and represents a ground-up Class A industrial development designed for versatility. The 64,600 square foot building is situated on a 6.5-acre site and can accommodate up to eight tenants, with minimum suite sizes starting at approximately 6,500 square feet. Clear heights of 20 to 22 feet across the warehouse floor, three motorized drive-in doors, and eight overhead dock positions give the building the physical specifications required for flex warehouse, light manufacturing, and distribution tenants. The site includes 90 car parking spaces and 30 truck parking spaces on the southern side of the property, a configuration that supports logistics-intensive users that may not be well served by typical office park industrial product.

The building's NNN lease structure puts operating expenses on tenants and minimizes ongoing landlord obligations, a structural advantage for a building in early lease-up where maintaining predictable net income during stabilization is particularly valuable. The sponsor's in-house asset management team oversaw leasing and operations throughout the loan period.

The Hebron industrial submarket offered a favorable supply-and-demand backdrop at closing. Total submarket inventory was approximately 38.6 million square feet with a vacancy rate of 7.2 percent. Despite approximately 5.2 million square feet under construction at the time, representing 13.5 percent of existing inventory, market-level rents had grown 1.5 percent year-over-year and cap rates had compressed to 6.7 percent on average industrial sales. Properties adjacent to CVG commanded attention from air cargo-oriented tenants, freight forwarders, and logistics operators whose operations were directly tied to the airport's growth. Amazon's continued investment in the corridor reinforced that thesis.

THE RRA SOLUTION

$4,000,000 Non-Recourse First-Position Bridge Loan with Leasing Holdback, Structured as a Cash-Out Refinance of an All-Cash Construction Project

RRA structured a $4,000,000 non-recourse, interest-only bridge loan to provide liquidity against the sponsor's all-cash construction basis while funding the remaining lease-up through a holdback mechanism. The loan was sized in two components: an initial disbursement of $3,185,000 at closing, representing reimbursement of approximately 63 percent of the project's total cost basis of $5,026,795, and an $815,000 "good news" holdback to fund tenant improvements and leasing commissions as leases were executed and qualifying conditions were met. A $30,000 interest reserve was included at closing to supplement cash flow during the period preceding stabilization.

The loan was structured at a fixed rate with a 24-month initial term and two six-month extension options. Initial payments were interest-only, with extension-period payments stepping to a 25-year amortization schedule. There was no prepayment penalty and no lockout period, giving the sponsor maximum flexibility to exit the loan on their own timeline. The loan carried no interest on unfunded holdback amounts, meaning the sponsor was not carrying the cost of capital before the leasing conditions that would trigger a draw were met.

EXECUTION

Lease-Up Progressed from 17 Percent to Stabilization, Supported by Airport-Adjacent Demand and the Sponsor's In-House Leasing Effort

The sponsor's business plan targeted full occupancy by Q3 2021. The property entered the loan with one lease in place and a signed letter of intent from a second tenant, which together represented over half the building's square footage once the LOI converted to a lease. The surrounding submarket's fundamentals continued to support the leasing effort: vacancy remained controlled despite elevated construction activity, and Amazon's operations in the CVG corridor continued to generate secondary demand from suppliers, logistics providers, and support businesses looking for proximity to the airport and its distribution infrastructure.

The leasing holdback was structured to deploy in tranches as tenants executed leases and tenant improvement work was completed, allowing RRA to manage credit exposure in alignment with the actual progression of the business plan. The sponsor's in-house management team handled leasing directly, which kept overhead low and decision-making fast during what was an active period of tenant negotiations.

THE EXIT

Loan Repaid in Full, April 2022

The loan was repaid in full on April 15, 2022, approximately 12.5 months after closing. A newly constructed, multi-tenant flex industrial building adjacent to CVG and Amazon's Air Hub, backed by a sponsor with a free-and-clear cost basis and active leasing momentum, is the profile of a property that conventional lenders want to refinance as soon as stabilization is achieved. The bridge loan did exactly what it was designed to do: provide the sponsor with immediate liquidity against their all-cash construction basis, fund the remaining lease-up costs through the holdback mechanism, and stay out of the way as the sponsor executed.

The hold period of just over a year reflected the quality of the asset, the location, and the leasing market at the time. RRA's ability to underwrite a newly delivered, partially occupied building in a secondary Kentucky market and deliver certainty of close in 30 days gave the sponsor the capital structure to continue executing without interruption.