Backstory: The client’s 102,000 s/f suburban office building had no tenant and the client had no ability to refinance his maturing CMBS loan.The biomedical tenant which occupied 100% of the building elected to consolidate operations into an existing facility and to not renew the lease leaving the property 100% vacant. Given that the property’s highest and best use accommodated biomedical users rather than general office users, attracting a single tenant in an already 60% vacant, industrial complex was an impossible feat.
The value of the property had dropped precipitously since the loan was securitized and without lender cooperation, the only logical alternative was for the property to go back to the lender.
Borrower’s Response: The borrower’s innate and comprehensive knowledge of this particular suburban office marketplace including the canvassing of prospective biomedical tenants determined that a single user was not on the horizon. A more likely lease up scenario would be to subdivide the space and lease it up over 36 months. The Borrower leveraged their in-house construction and engineering skills to reconfigure the building into four multi-user tenant spaces. The Borrower committed to infuse capital to facilitate the tenant improvements necessary to attract new tenants as well as pay down the Loan.
Lender’s Response: After considering multiple options, the lender agreed with The Henley Group that the best operator for the property was the existing borrower. The Borrower had a strong track record of re-positioning biomedical and industrial office assets in the surrounding markets and was engaged in several tenant negotiations for the subject asset. The lender agreed to forgo foreclosure and to extend the loan and modify other loan terms allowing the borrower to take advantage of the recent leasing traction. The Henley Group liaised with both the borrower’s and lender’s counsel throughout the documentation process, neutralizing disruptive deal issues that threatened the closing.
David Goldfisher is a principal of The Henley Group, a CMBS Borrower Advocate firm.