Commercial Real Estate Blog

Shorenstein has acquired a $51.1M mezzanine loan collateralized by McCandless Towers in Santa Clara. Globe St. is reporting that the the debt was acquired at a discount.

McCandless Towers was purchased by Tishman Speyer last July at a cost of $500 PSF ($213M), representing a 4.5% cap rate. McCandless Towers features two 11-story, 210,000 square foot, Class A office buildings anchored by McAfee. The project was completed between 1986 and 1988 and features a 1,400 stall parking garage. The project was built by Swinerton and designed by Hoover Associates.

Shorenstein has been an active buyer of junior debt in primary markets, picking up debt in Washington D.C., New York, LA, and more locally, a $40 mezzanine loan on the Moffett Towers project in Sunnyvale which we wrote about back in October of 2007.

While debt markets are facing some turbulence, the secondary market for Conforming Loans (those under $417,000 for single-family dwellings) is still healthy giving providing prospective homebuyers with readily available loans at attractive interest rates. For mortgages above this threshold however, lending rates are not only higher but borrowers also face more stringent requirements.

For many parts of the country, $417,000 is a relatively high threshold relative to residential real estate prices meaning most loans will qualify as a conforming loan. In Silicon Valley however, $417,000 does not go very far. In July, the median sales price for single-family homes in San Jose was $769,000 - a number which pushes most mortgages beyond the Conforming Loan limit into Jumbo Loan (those loans above $417,000) territory.

The higher rates and more stringent lending standards results in a decrease in the number of buyers for these more expensive homes. The result is an increase in demand for rental properties as fewer buyers are able to qualify for the loans they need to purchase making multi-family a segment commercial real estate investors should play close attention to.