Project Sherman Plaza is a 25-story condominium tower totaling 253 units, situated atop 153,000 square feet of retail and medical office space, and alongside a 12-story 1,585-space public parking garage. At total cost of $190 million, Sherman Plaza was the most expensive project ever planned for downtown Evanston at the time of its development. Acting in a capital markets advisory capacity, Michael Sieman designed and executed a complex institutional equity capitalization to allow for development of Sherman Plaza ahead of achievement of typical development milestones.
Challenges This mixed use development included a joint-venture between an experienced retail developer and condominium developer along with a multi-level public relationship with the City of Evanston via various lease commitments and tax increment financing “TIF”, each with individual underwriting requirements. The Joint-Venture desired to move forward with the project before the typically-required minimum pre-sale and pre-leasing had been achieved, while avoiding diluted equity returns and minimizing potential recourse liabilities, and still adhering to the TIF requirements.
Result Michael, during his tenure at Baird & Warner Real Estate Capital, structured an investment-grade-credit-rated firm equity standby commitment. What essentially functioned as a “put” option mitigated the downside risk while allowing a remarking effort to maximize profits. Because of the firm commitment, high leverage non-recourse construction financing could be achieved eliminating not only the need for additional equity, but also recourse risk. The multiple interests of a complex public-private development were addressed allowing construction to proceed prior to traditional economic hurdles.