Blackstone Gets $126M Loan for Office Buy
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SAN FRANCISCO-Those who follow @GlobeStcom on Twitter and @GlobeStLIVE may have seen a post teasing the announcement on Friday, but GlobeSt.com has learned that a $126-million first mortgage loan and mezzanine loan has been originated on 100 Montgomery, a 25-story class A building purchased by Blackstone. The building is situated on the corner of Sutter and Montgomery Streets in San Francisco’s financial district and totals more than 420,000 square feet.
Blackstone Real Estate Partners VII purchased the building from Hines last month. Starwood Property Trust originated the loan. According to Starwood, the firm “intends to sell the first mortgage in the near term to increase its investment returns while retaining the mezzanine loan.”
According to Boyd Fellows, president and director of Starwood Property Trust, this deal is similar to a recent $61-million first mortgage loan on two class B+/A- office buildings Glendale, CA. In that transaction, the firm funded the entire capital stack with a flexible structure to “meet Blackstone's exact financing needs.”
In this particular deal, the total financing will have an initial funding of $115.5 million with $10.5 million of future funding for tenant improvements and leasing commissions. The interest rate floats over LIBOR and the loan matures in three years with two one-year extension options, according to a prepared statement.
Fellows tells GlobeSt.com that “the building has just undergone significant improvements, has below market leases in place that will role soon, and the vacant floors, including the top floor, are very good spaces, which should command premium rents.” He points out the building targets tech firms that can’t find acceptable space two blocks away south of market.
The “significant improvements” he is referring to is $54 million of capital improvements, including a comprehensive renovation in 2009 that allowed for a new crystallized glass facade, lobby and common area updates and new retail storefronts. Additionally, the building achieved LEED Gold Certification.
He continues to tell GlobeSt.com that the San Francisco market has tightened dramatically in the last 12 months. “There is zero new supply in San Francisco anytime soon,” he says. “Rents are up 20% from approximately $36 to $43 per square foot for class A office.”
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