A life company put 65% debt on eleven-building Fort Collins flex

A life insurer has agreed to hold fixed-rate paper on eleven multi-tenant flex buildings in Fort Collins, Colorado, and the terms say more about small-bay industrial credit than the price does.

BWE's Peter Keepper and Summer McSwain originated the $27.3 million acquisition loan on Prospect Innovation Campus, a 226,461-square-foot collection of light-industrial flex and R&D buildings that Ogilvie Partners sold for $42 million. That puts leverage at roughly 65%, or $121 per square foot of debt against a $185 basis, with interest-only payments for most of the term and prepayment flexibility built in.

Interest-only for most of the term on a multi-tenant portfolio means the lender is underwriting the rent roll's renewal schedule rather than an amortization table: a real position on Fort Collins tenant demand and the structure a life company writes when it expects buildings to hold their tenants instead of handing the borrower a refinancing problem in year eight.

The campus runs about 30% office, 40% warehouse and 30% research and development, and institutional debt capital has spent three years treating office exposure as something to be avoided or structured around; this lender took a third of the collateral in office space and wrote the loan anyway. BWE's case rests on Prospect Road being one of the most established flex and office nodes on the north side of Fort Collins, on a campus more than 91% leased to a diverse roster of tenured tenants, and on the city's industrial and office submarkets carrying low vacancy with little to no new construction.

With eleven buildings averaging roughly 20,600 square feet each, a single vacancy dents a 226,461-square-foot rent roll rather than gutting it, and a single-building flex asset with the same 30% office mix would not likely have cleared the same terms; the portfolio structure, not the real estate, is what makes the office share financeable at this leverage.

The ticket is modest for an insurer's balance sheet, so the correspondent relationship likely carried as much weight as the asset in getting it sized. Naming no carrier, BWE placed a fixed-rate, prepay-flexible package—the product life company correspondents exist to write—on a multi-tenant flex campus, and the placement is the useful part of the disclosure.

Carry the 65%. If the next Fort Collins flex trade clears at a similar basis with insurance company debt behind it, small-bay industrial along the Front Range has a floor that does not depend on a bank's appetite or an open CMBS window, and owners holding flex with office inside the mix have a permanent-capital bid to refinance into. If nothing else clears near that leverage, this was a correspondent's relationship loan rather than a market level, and the office-in-flex bid is thinner than one deal suggests.