More than one year after buying a 22-storey California office property for $71 million cash, Richard Ellis has secured financing for the deal with a $44 million first mortgage.
In a sign that debt markets are starting to ease, the Los Angeles-based real estate investment firm has secured a floating, five-year loan from fellow Los Angeles-based private equity real estate firm, Mesa West Capital.
Mesa West said in a statement the mortgage was secured against 500 North Brand Boulevard, a 420,000-square-foot, office building in Glendale, California, which is believed to be about 75 percent leased. The loan is pre-payable after just two years, allowing CBRE to look for alternative financing after two years, rather than be locked into a five or seven-year mortgage.
Steve Fried, director and co-head of west coast originations at Mesa West, which provides floating rate, short-term bridge loans to real estate firms, told PERE for non-stabilised, transitional properties, such as 500 North Brand, owners didn’t want to lock themselves into long-term loans when they could potentially refinance in a few years once occupancy levels have increased, and debt markets have returned.
The property was bought through CBRE’s value-added fund, Strategic Partners US Value 5, in late 2008. The fund, together with Strategic Partners US Opportunity 5, make up the $2.1 billion CBRE Strategic Partners US 5 vehicle, which closed in May 2008.
CBRE Investors acquired the Glendale office as part of a portfolio of three properties from one of ING Clarion’s open-ended funds, after ING was forced to sell some assets to meet redemptions. Managing director and head of acquisitions and development at ING Clarion, Jeffrey Barclay, told a New York real estate conference last year the firm accepted a 40 percent write-down on the assets in an effort to maintain liquidity in the open-ended fund. “We wanted to maintain flexibility. We even have some cash to begin the process of redemptions,” he said at the time.
The properties, two of which are located in East Rutherford, New Jersey and West Palm Beach, Florida, were purchased by CBRE Investors for roughly $200 million in total, with the 500 Brand Avenue property costing an estimated $71 million, according to sales data from Real Capital Analytics. ING spent approximately $320 million acquiring the offices between 2003 and 2006, originally buying the New Jersey property from CBRE in 2002.
Mike Burrichter, principal of CBRE Strategic Partners US, told PERE in March last year the all-equity deal was closed in a matter of weeks, with discussions beginning in mid-November and a final deal signed on 30 December, 2008. Burrichter said CBRE Investors underwrote the transactions with no rent growth assumptions for the whole of 2009 and 2010. “No one is underwriting rent growth in 2009,” he said at the time.