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SAN FRANCISCO-Sand Hill Property Co. has closed on a $10.85-million construction and permanent financing for the development of a medical office building in Palo Alto, according to CBRE Capital Markets Debt & Equity Finance Group, which sourced the loan.

The three-story, 20,750-square-foot building will be built on one-half acre at 49 Wells Ave, west of Highway 101 and north of Page Mill Road in Palo Alto. The entire site was previously occupied by a single warehouse. Sand Hill is hoping to obtain a LEED Silver rating from the US Green Building Council.

The new building will rise 46-feet from the ground and have two levels of subsurface parking that will accommodate 68 vehicles. The space has been fully preleased by a medical foundation that will use the facility to provide health services to women.

CBRE executive vice president John Nelson and SVP Don Polishuk arranged the loan for Sand Hill. Nelson tells GlobeSt.com the lender is a life insurance company, most of which don’t do construction-to-permanent loans, let alone small ones. He worked on the loan for a year, he says.

The four-and-a-half year loan has a 25-year amortization and a 6.9% interest rate. The first 18 months of the loan are interest free, so it’s really a three-year permanent loan. The loan works out to about $500 per sf. The value of the completed project is about $750 per sf.

“This is the first construction-perm program for us,” says Sand Hill founder Peter Pau. “It seems very efficient, and we are hopeful this will work out for both sides.”

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