Transaction Overview
GSP arranged $16,510,000 in non-recourse first mortgage financing from a national debt fund on a 65% occupied Class A office complex in North San Diego County, California. A credit tenant with a 2022 lease expiration accounts for over 90% of current property income and the vacancy is mostly comprised of a single 26,000 square foot contiguous space.
GSP marketed the transaction by filtering out vacant spaces that were not competitive with the subject property and highlighted the lack of large customizable available spaces in the market which the subject property possessed. GSP sourced a lender familiar with the local office inventory and recognized the leasing potential of a large customizable floor plate in a market with increasing demand for corporate headquarter space.
In order to maximize Sponsor cash flow, the loan is structured as interest only with a three year initial term and two one-year extension options. To mitigate rollover risk at loan maturity, a cash flow sweep commences if the existing credit tenant does not exercise an early lease renewal by month 30 of the loan term. $14,750,000 in loan proceeds funded at closing with an additional $1,760,000 funding for lease-up related tenant improvements and leasing commissions to be disbursed prior to month 24 of the loan. Interest on the future funding is not charged until the earlier of disbursement of proceeds or month 24 of the loan. The first mortgage debt priced over one-month LIBOR and required a LIBOR cap with a 3.00% strike price for the initial term.
