Fident Capital secured a $5.9MM loan for the acquisition and renovation of a multi-tenant office complex located in one of San Diego’s strongest office submarkets: Sorrento Mesa. A national private debt fund provided the loan with holdbacks for capital improvements, tenant improvements, and leasing costs.
The two building, two-story, asset is well located and leased by local businesses. The borrower plans to make modest improvements to lift rents closer to market while approaching staggered lease roll-over with a blend and extend approach.
The client sourced the transaction off-market and engaged with Fident for an initial underwriting support while negotiating price. With a favorable basis and below-market in-place rents and low vacancy, potential lenders needed to understand the business plan; an underwrite focused solely upon the stabilized asset would come up short on desired loan proceeds. Fident procured a lender that understood the forecasted rent lift and structured a deal that funded improvements and allowed enough free cash flow so that the borrower could earn a current return on their investment.
Challenges included the diverse tenant mix that occupied just 1,700 SF per tenant, the need for non-recourse, an insurance policy expiring just prior to closing, and modifying lender control language to accommodate the borrower’s in-house property management agreements.