The purchase of a pair of California office buildings looks set to proceed. Trade sources have reported that Oregon-based BPM Real Estate has secured $78 million in financing from Citigroup to buy a 111,000-square-foot office tower in Aliso Viejo and a 116,000-square-foot commercial property in San Jose. The loan is reportedly structured to be interest only for the entirety of its 10-year term. BPM has been active in the Oregon commercial real estate market for many years and already owns several office and hotel properties and an apartment complex.
The commercial loan will cover most of the $120 million BPM paid for the two properties, which are both fully leased. A tenant swap is scheduled to take place in early 2021 at the Aliso Viejo property. A semiconductor company has agreed to vacate the premises to allow a health care provider to take over the entire property. The San Jose building is occupied by a computer parts manufacturer that subleases the space from a semiconductor supplier.
The deal marks the third time that the Aliso Viejo property has changed hands in just two years. The building was previously sold in April and August 2017. The two buildings, which were both built in the late 1990s and recently renovated, generated $8.7 million in revenue in 2018 and earned a combined cash flow of $6.6 million. The deal is BPM’s first foray into the California commercial property market.
Deals like this one can be challenging to negotiate and bring to a close. Attorneys with experience in commercial real estate transactions could help property developers and investors to anticipate problems like environmental or zoning issues and take steps to address them. Attorneys may also scrutinize loan documents for provisions that could become problematic and ensure that all of the parties involved understand their obligations.