Amid a challenging rate environment, a loan refinancing deal made for a tech center in Fremont could point to a new lender of choice for real estate debt borrowers.
Commercial mortgage banking firm Gantry secured a $17.3 million permanent loan from an insurance company to refinance the Bayside Tech Center, a 86,000-square-foot, two-building complex in Fremont. The lending source has gained popularity for its stable cost of funds and certainty of execution, observers say.
Redwood City-based real estate investor Dollinger Properties bought the pair of buildings at 47281 and 47361 Bayside Parkway in 2017 for $15.1 million, and later took out a CMBS loan in 2018 for $11 million, property records on file with the Alameda County Assessor’s Office show.
The loan was set to expire in 2028, but after one of its tenants signed a long term lease extension there at a much higher monthly rental rate, unlocking built-in equity, the property owner opted to refinance its loan.
Gantry Principal Tony Kaufmann, and Associates Alex Poulos and Joe Foley, represented the borrower. Kaufmann told the Business Times the new loan came from one of Gantry’s life company correspondent lenders and features an initial lockout period followed by flexible prepayment options through the remainder of the loan.
The initial loan had an interest rate of 4.89%, and the new loan landed in the mid-fives, Kaufmann said. To hash out the deal, the borrower had to pay off the CMBS loan, which included a prepayment penalty fee. Since the rate of the loan was lower, the prepayment penalty was too.
“It made sense, just with where the prepayment penalty was, to kind of take a slightly higher rate for a large kind of recapture of their equity right in the deal,” Kaufmann said.
Most of the banking sector has stopped or slowed its lending because of the decrease in liquidity in the market. At the same time, insurance companies, because of their different costs of capital and how their business model works, have remained extremely active in the market.
“Insurance companies have really been the belle of the ball for the last three years, while the banks have retreated significantly,” Kaufmann said.
While they offer benefits like certainty of execution, insurance loans make up roughly 13% of all commercial real estate debt. Despite the reduced borrowing appetite due to the disparity in rate increases and cap rates, Kaufmann is sensing a change in borrower behavior.
“You’re starting to see more people come off the fence and borrow, because either the general expectation is we’re in a new environment,” Kaufmann said.
