Nonetheless, Fried says that Mesa West considered 500 N. Brand a good risk for a number of reasons despite its less-than-stabilized occupancy and declining office market fundamentals. "This is a high-quality asset with a great sponsor," he says. He says that Mesa West believes 500 N. Brand will be able to increase occupancy because of its excellent location, the quality of the class A building and the flight-to-quality of tenants from lower-class to higher-class properties. Built in 1990, and renovated in 2002, 500 N. Brand is a 22-story LEED Gold certified tower at the center of Glendale's Central Business District and was part of a portfolio of three class A office buildings acquired by CBRE Investors in December 2008.

Mesa West competed with some life companies on the $44 million loan, which was arranged by Keith Huizinga and Brian Halpern of CBRE Capital Markets. Fried says that what the borrower liked about Mesa West's loan was that it offered prepayment flexibility that allows them to pay it off after two years. The loan floats over 30-day LIBOR.

Fried says that although relatively few lenders are willing to finance transitional assets these days, Mesa West is comfortable with them on deals involving high quality properties with good sponsors. "We would rather have a building that is 65% occupied but is a great building and is well-located, versus a 100% stabilized B building in a B area," he says. "That B building could be a different property with different cash flow in three years. We are attracted to higher quality properties because we think they are going to attract the tenants."

Mesa West, which is a non-recourse portfolio lender, is looking to lend on both stabilized and transitional properties in the office, industrial, multifamily, retail and hotel sectors. Fried points out that the company recently raised another fund of between $450 million and $500 million that it hopes to place within the next two years on properties on the West Coast and gateway cities on the East Coast; the company recently opened an office in New York City to facilitate the East Coast deals.

Finding deals of the right size and quality is difficult because competition for the biggest and best deals has grown among lenders and loan sizes are shrinking as values decline, according to Fried. "Basically all of the deals we are looking at have been cut by 30% to 50%," he explains. "What was a $30 million loan a few years ago is now $15 million to $20 million."