OFFICE BRIDGE LOAN IN SACRAMENTO, CA

Opportunity  

When the owners of a nearly century-old Sacramento asset needed funds to retire an existing lien and move ahead on their repositioning plan, they turned to Red Oak Capital Holdings. The single-story building is currently in shell condition and will be built out for the California Highway Patrol, which has signed a long-term lease for the space. Situated on 1.76 acres at 1300 U Street in the state capital’s downtown, the property consists of 47,456 square feet of net rentable area and provides surface parking for 77 vehicles.

Solution

Red Oak provided $8 million in financing under its Opportunistic Bridge Loan Program. The debt was structured with a fixed note rate of 11.00% and a two-year term with two 6-month renewal options. The interest-only loan represents 51.71% of its “As-Dark” valuation of $15.47 million, and 33.47% of its “As-Stabilized” value of $23.90 million.

The borrower will use the proceeds of the Red Oak loan to pay off $5.8 million in outstanding debt and complete the space planning and permitting of the property. The subsequent build-out will require additional funds, which will come from either Red Oak or another lender.

Considerations 

Despite weakness in the broader office market, the subject property is in the desirable Downtown Sacramento submarket, which saw its asking office rents reach a 10-year high in 2022. The sponsors have executed a long-term lease with the California Highway Patrol, which will produce a steady income stream once it commences.

The borrower is a partnership between Frank Kimball and Scott D. Greenberg, who are both successful entrepreneurs with significant expertise in commercial real estate development, investment and finance. Greenberg has amassed a $1-billion transaction history and impressive roster of projects, such as the hospitality-entertainment concept Smash INTERACTIVE, throughout his 30-year career. An expert in private debt and structured finance, Frank Kimball is the founder and principal of REILS Inc. investment platform and co-creator of the REILS debt program.