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Rreef Funds Closes on $700M Acquisition Loan

SAN JOSE-The 65% loan-to-cost financing takes out the bridge loan Rreef used to acquire the 5.3-million-sf Peery-Arrillaga portfolio in April for $1.1 billion.

By Brian K. Miller | Updated on July 23, 2006

SAN JOSE-Rreef America REIT III Inc. has closed on a $700-million acquisition financing that took out the bridge loan it used to acquire the 119-building Peery-Arrillaga portfolio in April for $1.1 billion. The seven-year loan includes a portion with a fixed interest rate and a portion with a floating interest rate, an industry source tells GlobeSt.com. JP Morgan Chase Bank provided the bridge and permanent financing and is expected to securitize the current loan, which closed about 10 days ago.

The loan allows Rreef certain pre-payment options and the ability to release properties from the loan for re-sale while requiring certain loan parameters be maintained, such as the debt service coverage ratio, according to the source. “You could ask three different people involved and they would come up with a different number for what the ratio is,” the source says. “It was a very difficult transaction from a lender’s perspective because the vacancy in the portfolio and a significant amount of above-market rents.”

The source declined to reveal the specific interest rate and float, saying only that it was “extremely competitively priced.” Eric Tupler of CBRE Melody, who headed up the loan origination team for both deals, declined to comment on or confirm the details, citing client confidentiality. He did say that the time between the bridge and permanent financing reflected the time necessary to inspect and appraise 119 buildings.

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