The SFO Logistics Center is located at 1070 San Mateo Ave.,one-quarter mile from the San Francisco International Airport andclose to the confluence of interstates 280 and 380, and theBayshore Freeway. The building has historically been used as afederal government services distribution center. However, thosetenants have been vacating the space over the past two years.Occupancy in the existing building is now approximately 11%, duelargely to its current state, according to local sources.

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Holliday Fenoglio Fowler says it arranged $56.34 million infinancing through Capmark Finance and that the loan represents 70%of the total project cost. The 36-month, non-recourseadjustable-rate loan floats 325-basis points over the 30 Day LIBORindex. HFF's California executives Peter Smyslowski and ScottMcMullin were the lead arrangers.

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"The deal got me excited because it attracted a good amount ofcapital interest," Smyslowski tells GlobeSt.com. "A key componentof the deal is that despite the loan size the lender did notrequire any syndication or flex language. The lender felt this wasa strong enough market that once the sponsor completed the buildingupgrades it would lease up quickly."

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The CapEx plan includes better ingress and egress, more loadingdocks, additional parking and structural upgrades. Once the work iscompleted, the expectation is that the space will lease up forbetween $1- and $1.10 per sf per month, NNN. The property isexpected to lease up quickly once improved because there is adearth of large, close-in quality industrial spaces.

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"The borrower realized an opportunity to take an existing assetwith strong distribution qualities and an irreplaceable location,and add immense value by merging the property with the adjacentsite, which will greatly enhance the distribution and logisticalqualities of the asset," Smyslowski says.

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