By The Registry Staff
In a market where securing new funds for office buildings is increasingly challenging, the California State Teachers’ Retirement System (CalSTRS) has successfully obtained a $70 million loan to refinance its 337,400 square foot office property at 11755 Wilshire Blvd. in Los Angeles.
According to a report from The Real Deal, the senior mortgage was provided by Wells Fargo Bank, with $51.5 million earmarked to be part of a commercial mortgage-backed securities (CMBS) deal. The CMBS pool is anticipated to close next month and is estimated to total approximately $519 million. The loan, set to expire in 2029, served the purpose of paying off prior debt from Northwestern Mutual. Additionally, CalSTRS injected approximately $960,000 to assist in retiring the loan and establishing reserves for tenant improvements.
Built in 1986, the building stands 24 stories tall and offers seven stories of covered parking, according to a website for the property. Per the report, the office building is 63 percent leased, boasting an average rent of $60 per square foot annually. The largest tenant, Kinetic Content, holds a lease expiring in 2026 with a five-year renewal option.
Industry insiders, including brokers, investors and developers, highlight the current stringent lending environment for office properties. Lenders are exercising caution due to the rising prominence of remote work and a trend of tenants reducing their office space. This caution is reflected in lower loan-to-value ratios, requiring property owners to contribute more equity upfront.
However, recent data suggests that more commercial real estate owners are turning to CMBS lenders as opposed to utilizing traditional banks. According to a recent report by Moody’s, various factors like heightened interest rates, fluctuations in property values and diminished cash flows have contributed to more stringent lending standards adopted by banks and other commercial real estate lenders throughout 2023. In response to these challenges, many borrowers, both new and existing, are actively exploring alternative financing options, with CMBS loans emerging as a favored solution.
