Orlando City Soccer Club's affiliate developing the Downtown Orlando stadium now under construction sourced a $79.5 million loan from JPMorgan Chase Bank in late September, adding a new layer to the project's capital stack that had, until now, been forecast as mainly owner equity and low interest EB-5 loans.
A variety of LLC affiliates of OCSC signed contracts on Sept. 30 to help guarantee the leasehold mortgage, with those documents filed earlier this month in Orange County.
Orlando Soccer Stadium LLC, formed to build and operate the stadium, secured the $79.5 million loan with a maturity date of Sept. 28, 2018.
It's a bridge loan sought to cover the next two years until all of the $49.5 million in expected EB-5 funding is secured, Phil Rawlins, founder and president of OCSC, told GrowthSpotter on Friday.
Orlando Soccer Stadium Land Company LLC, which has spent $28.62 million since July 2015 to assemble 14.74 acres covering two city blocks, is leasing 10.554 acres within that assemblage to the stadium owner entity.
That land owner filed an Assignment of Leases and Rents for the stadium land, putting its property on the line to help secure the loan for its affiliate, the lessee.
To complement that, the stadium owner entity signed a team use agreement with Orlando Sports Holdings LLC for 30 years (through Sept. 30, 2046), giving that soccer club operator a license to use the stadium. All of the contracts are signed by Alexandre Leitao, CEO of Orlando City Soccer, and a manager of all the affiliate LLCs.
A leasehold mortgage is like other mortgages, except that it's secured by a lien on the tenant's rights under its property lease, rather than an owner's fee simple ownership, according to Michael Ryan, real estate shareholder with Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
This type of loan can be common in commercial real estate where new buildings are developed on leased land.
If the lender were to foreclose on the tenant, it would take over the rights to occupy that property, operate the project, and collect the revenues, as well as the obligation to pay rent and perform all of the other tenant obligations under the lease, Ryan said.
In this case, leasehold lender JPMorgan Chase is making a loan to the lessee (Orlando Soccer Stadium LLC), and is getting as security a mortgage of the tenant's interest in the stadium.
OCSC affiliates also filed an amended notice of commencement for the stadium project, with a performance bond that says builder Barton Malow Company's contract is worth more than $104.2 million.
Rawlins said Friday the project's budget is now close to $157 million, up from a previous estimate of $156 million. The land owner affiliate sourced a mortgage worth $18.076 million in late June from the City of Orlando to finance its $22.085 million purchase of the majority of the stadium land.
More than 60 percent of the stadium's cost will be covered by club owner equity, with about 31 percent to follow from EB-5 foreign investors, Gonzalo Lopez Jordan, managing partner with American Regional Center Group out of Miami that is coordinating the EB-5 recruitment, said in late August.
That 31 percent from EB-5 is consistent with a $49.5 million offering being made by Lopez Jordan for up to 99 foreign investors in the stadium construction project.
Rawlins said that owner equity and EB-5 are the only two funding sources for the stadium project. The bridge loan was sought to cover the interval as $500,000 individual deposits are made by foreign investors, "which come in at a fairly slow clip."