California Office Buyer Lands $78M CMBS Deal From Citi


BPM Real Estate has reeled in a $78 million loan from Citigroup (C) to fund its purchase of a pair of California office buildings, according to Fitch Ratings, which analyzed the securitized mortgages.

The debt funds the company’s purchase of similarly sized properties in Northern and Southern California: One Enterprise, a 111,000-square-foot office building in Aliso Viejo, in Orange County, and 2300 Orchard, a 116,000-square-foot building in San Jose, about three miles north of the city’s central business district. The 10-year debt carries a fixed 4.13 percent interest rate and has an interest-only structure through the entirety of that term.

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BPM, led by Portland, Ore.-based real estate investor Walter Bowen, paid $120 million for the two properties, contributing $46.4 million in equity on top of the Citigroup debt. The buildings are both fully leased, but One Enterprise has a major tenant swap set to take place in early 2021, when one lessee, semiconductor provider Microsemi, plans to vacate so that the building’s other renter, Ambry Genetics, can take over the full property. 

2300 Orchard, on the other hand, is fully leased by Marvell Technology Group, a Nasdaq-traded semiconductor supplier that has made parts for Apple (AAPL)‘s iPhone and Google (GOOGL)‘s Chromecast. But the lease situation is complicated there too, because Marvell subleases the entirety of its space in the building to A10 Networks, which makes devices for computer networks.

BPM paid AEW Capital Management $59 million for the Aliso Viejo property and plunked down $61 million for 2300 Orchard in a deal that saw the building change hands for the third time since 2017. The seller was Han’s Holdings, which bought the property for $48.5 million from Brookfield (BN) in August 2017. Brookfield had itself bought the building only in April of that year, earning a 2.1 percent profit in four months, according to Commercial Property Executive.

Last year, the pair of buildings earned a combined $6.6 million in cash flow on effective gross income of $8.7 million. Both were built in the late 1990s and have received renovations within the last year.

The deal marks a southward turn for a company that has hitherto emphasized acquisition and development work north of the California-Oregon state line. Its developed more than half a million square feet of commercial space in Portland proper, including hotel and office properties, and has also owned commercial real estate in Bend, Ore., Eugene, Ore. and Woodinville, Wash., a town 15 miles northwest of Seattle where BPM has controlled an apartment complex.

A Citi spokesman declined to comment. Representatives for BPM couldn’t be reached.