Thorofare Capital has funded $9,670,000 in discounted payoff financing for The Market Station at Santa Fe Rail Yard, a 94%-leased (61% occupied) Class A retail property located at 500 Market Street in Santa Fe, New Mexico. To execute on the discounted payoff opportunity, Thorofare collaborated with the sponsorship for Thorofare’s $8,700,000 purchase of the existing note, which had an outstanding principal balance of $13,800,000 (63% of UPB). The acquired note was the original construction note and the construction lender agreed to a discounted payoff as development delays, cost overruns, and interest accruing longer than planned had left the value of their note at nearly 100% of the value of the property. Upon closing, Thorofare amended and restated the note terms to include a CapEx reserve towards construction completion, a TI/LC reserve towards completing the build-outs for pre-leased space, and a hybrid payment reserve while the rent abatements burn off to bring the property to a double-digit debt yield.

Formerly a rail yard and train station dating back to 1880, The Market Station at Santa Fe Rail Yard is a public/private development with the land owned by the City of Santa Fe and leased to private entities. The site is accessible at street level from all four sides. The property is located directly above a three-story public parking garage containing 404 spaces, which is owned and operated by the City of Santa Fe. This ground lease carries an initial 50-year term and four 10-year options. The property is part of the broader re-development occurring in downtown Santa Fe.

The re-development consists of a new farmer’s market, new streets, a plaza and a $13,000,000 park, and numerous shops, galleries, and newly-formed retail businesses. The district includes a new 10-screen “Alamo Draft House-style” theater 100 feet away from the Property, as well as a Whole Foods Market producing in excess of $1,000/SF in sales. REI, is an outdoor recreation gear retailer with corporate sales exceeding $2 billion in 2013, took occupancy in 2008 and is the anchor tenant occupying 44% of the net rentable square feet. Outside Magazine, a leading active-lifestyle and adventure-travel magazine, is headquartered one block away. The Santa Fe Depot, which is steps from the Property, is the northern terminus of the New Mexico Rail Runner Express, a commuter train linking Albuquerque and Santa Fe averaging over 1.1 mm riders per year over the past 5 years.

This financing transaction provided an opportunity for the sponsorship to reset its basis in the project and ultimately profit from this development upon a refinance or sale. With active management and timely completion of the tenant improvements, the property is slated for stabilization in Q4 2015. Thorofare placed the loan in its third discretionary debt fund, Thorofare Asset Based Lending Fund III, L.P.