Cash is King
S.F. is currently in a perfect storm for buying, selling, trading, and financing, thanks to an abundance of capital. We checked in with Cassidy Turley SVP and partner Kurt Scheidt to find out the key to a winning bid.
Take S.F.-based SFF Realty Fund II's recent purchase of a 145k SF Marin County office building primarily leased to Sutter Health. Kurt just locked in a five-year deal with a life insurance company in the low 3% range. (That's pretty cheap money, he says, with a couple years of interest only.) SFF, partly headed by Peter Sullivan, raised $100M for its second fund, to purchase up to $300M of real estate all over the Bay Area (this was the second purchase; the first was Montague Oaks Biz Park in San Jose).
SFF's approach is to close all cash, then hire Cassidy to go put debt on the property. Because it's a seller's market, he's seeing sellers typically give a mere 15 days for due diligence then going nonrefundable to close in 30 days. It takes more than 45 days to put a loan in place, he says, but sellers don't care about a buyer's financing issues; they want their price and they want it ASAP. So what's a buyer to do? Close all cash then replenish that cash by getting a loan after buying a property. Kurt's been in this biz for 30 years; in 2012 his mortgage brokerage firm Kearny Capital Partners was bought by Cassidy. Another recent deal he worked on: 1155 Market, above (more on that in a sec).
In the city, Kurt is out to market on a bridge loan for 939 Ellis (above). The three-year floating rate makes sense for the new owners, who plan to re-tenant it soon. In April, Columbia Pacific of Seattle plunked down $16.4M, and when the tenant Bay Area Air Quality Management District moves out in a year, the plan is to gut the building. Kurt's getting the owner a $20M loan—essentially a construction loan—that includes money for the capital improvements and TIs. Another example: the recent sale of 1155 Market, which involved getting a lender to agree to a release provision once the Lighthouse for the Blind buys the top three floors. Cassidy brokered the $58M first to Starwood Capital and also arranged equity financing with Canyon Capital Partners on behalf of buyer Patson.