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.

Chan Zuckerberg Initiative is rolling out a major expansion next to the organization’s Redwood City headquarters in a boost for the Peninsula’s struggling biotech sector.

The Chan Zuckerberg Institute for Advanced Biological Imaging signed a 226,000-square-foot lease at Elco Yards, a new project on the edge of downtown along the Caltrain corridor, according to people familiar with the deal. Completed at the end of December, it was one of the single largest biosciences transactions in the Peninsula market and the largest new lease overall in San Mateo County.

The agreement could provide a positive jolt to the market, real estate observers say. Bay Area life sciences companies have been cutting jobs amid a yearslong industry slowdown.

The institute targeted an area that included Palo Alto and San Carlos but favored Elco Yards because of its resources, including an ability to provide state-of-the art microscopes, sources said.  It is one of the few expansions of biosciences lab space in a Peninsula downtown.

The Chan Zuckerberg Initiative, an umbrella entity encompassing both for-profit and nonprofit ventures with funding from Meta Platforms CEO Mark Zuckerberg and his wife, Priscilla Chan, first moved to Redwood City from Palo Alto in 2018. CZI, as it is known, subsequently expanded to other offices in Redwood City and is currently headquartered at 1180 Main St. in the city.

The value of the imaging institute’s lease is approximately $375 million, people familiar with the deal said.

The deal comes after the Chan Zuckerberg Initiative completed an 111,000-square-foot expansion at its nearby headquarters last year, according to market data. The organization did not respond to a request from the Business Times seeking more details.

In late 2021, the Initiative pledged up to $3.4 billion in funding over the next decade to study and eventually eradicate human disease, with the imaging institute announced as part of its plans. The institute assembled an initial research team in 2022. Among its research areas, it’s exploring how superior imaging methods with high-powered microscopes could be a key to understanding such things as how cancer cells influence tumor growth.

Elco Yards is a massive development in downtown Redwood City. Developed by IQHQ, it features a mix of properties with about 670,000 square feet of life sciences and office space and hundreds of planned residential units. At roughly eight acres, the project includes four buildings, each averaging just over 200,000 square feet. The Chan Zuckerberg imaging venture took one of those buildings.

Elco Yards was designed by WRNS Studio and is marketed for lease by Cushman & Wakefield’s Ben Paul. Mike Courson, with Newmark, and Matt Germino, with CBRE, represented Chan Zuckerberg in lease negotiations.