Debt stack & implied equity

Capital Structure

Illustrative Office Tower — Office Condominium Unit

Class A office condominium unit · 214,600 rentable square feet · two facilities · debt stack as at 31 March 2025

Assumed value

$575.0M

Instructed assumption

Total debt

$385.0M

Two facilities, both fully drawn

Implied equity

$190.0M

Residual, 33.0%

Total LTV

67.0%

Against assumed value

Area (RSF)

214,600

Derived from the unit rent roll

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Notes and assumptions

Value. $575,000,000 is an instructed assumption for this analysis, not an appraised value. The appraisal material in this set is an December 2024 excerpt and no concluded as-is value appears in it; every loan-to-value and per-square-foot figure on this page moves proportionally if the value changes.
Denominator. 214,600 rentable square feet is the sum of the two blocks on the unit rent roll — 142,300 square feet across the lower four floors and 72,300 square feet across the upper two.
Pari passu. Notes A and B are two notes under one loan agreement with one rate, one maturity and one set of covenants. They share a single band, a single cumulative balance and a single loan-to-value; the split reflects state mortgage-recording-tax mechanics.
Both loans are fully drawn. The extension fees paid in July 2024 are each stated to be 0.20% of Principal Debt — $640,000 on the senior loan and $130,000 on the mezzanine loan, implying $320,000,000 and $65,000,000 outstanding.
Maturity. Both facilities were extended to the first extended maturity date of 18 July 2025. One further one-year option remains on each, to 18 July 2026, conditioned among other things on re-letting at least 70,000 rentable square feet of the legacy space.
Illustrative example. Based on a real deal file and anonymised for publication: names, amounts, dates, rates and covenant levels have been changed. The structure and loan mechanics are kept as found in the documents.

$320,000,000 maximum principal, fully drawn. Two pari passu notes under a single loan agreement; the split is state mortgage-recording-tax mechanics, not two levels of seniority.

Index caveat. The 2024 extension confirmation recites a Second Amendment and a LIBOR Transition Amendment for this senior facility, both dated 17 January 2023 and effective 1 February 2023. Neither is in this document set. The LIBOR Transition Amendment that is present amends the mezzanine facility. The senior index shown above is therefore the index as originally written, with the loan agreement’s own successor-rate mechanics as the only fallback on file — not the replacement index that amendment would have set.

Tranche detail

Note A — Initial Advance: $228,412,750.60, advanced on the closing date
Note B — Additional Advances: Up to $91,587,249.40, drawn for interest on both loans, condominium operating expenses, anchor-tenant leasing costs and the affiliate tenant-improvement allowance
Gap note: A $32,615,240.18 gap note sits inside the Note B recording structure — recording mechanics, not incremental debt
Amount outstanding: $320,000,000 as at the initial maturity date, evidenced by the $640,000 extension fee stated to be 0.20% of Principal Debt

Parties

Borrower entity: Office Unit Owner LLC, a Delaware limited liability company
Administrative agent / lenders: A national bank as administrative agent; the agent held the full $320,000,000 commitment at closing with a minimum hold of $80,000,000 through the initial syndication period
Guarantor: The sponsor, a limited partnership

Guaranties, recourse triggers, liability limits and guarantor financial requirements

Non-recourse carveout guaranty — loss recourse: Fraud, wilful misconduct, waste, unpaid taxes, insurance and condominium charges, mechanics’ liens, misapplication of tenant-improvement advances, breach of the single-purpose-entity covenants and prohibited transfers
Full-recourse triggers: Bankruptcy of the borrower, guarantor or sublandlord; assignment for the benefit of creditors; opposing the lender’s stay relief; a transfer or further mortgage of the fee; loss of sponsor control; an unconsented transfer of 50% or more of the ownership interests
Carry guaranty: Guaranty Agreement (Interest and Carry) — accrued and unpaid interest, prepayment premiums and spread maintenance, fees and late charges
Leasing costs guaranty: Guaranty Agreement (Leasing Costs)
Amendments to the guaranties: All three amended by the omnibus lease-consent amendment dated 14 October 2022
Guarantor financial covenants: Net worth not less than $250,000,000; liquid assets not less than $25,000,000; cash from operations not less than $40,000,000 per fiscal year
Liability limit: No aggregate dollar cap on the carveout guaranty — liability is bounded by the enumerated loss-recourse and full-recourse categories

Pricing

Loan origination date: 18 July 2019
Fees: Extension fee of 0.20% of Principal Debt at each extension; $640,000 paid on the first extension; late charge of 4.0% on any payment more than 10 days late; $2,500 assignment and recordation fee
Maximum principal amount: $320,000,000
Interest rate type: Floating, interest-only
Index: One-month LIBOR as written, grossed up for the reserve percentage. See the index caveat above — the senior facility’s own transition amendment is not in this document set.
Spread: 2.10% per annum, stepping down to 1.85% once the affiliate master-lease tenant occupies its space, the legacy subtenant occupies and begins paying base rent, and the legacy master-lease tenant begins paying base rent
Index determination date: The first London banking day of each month
Index floor: Zero — a negative index is deemed zero
Interest rate hedging requirements: A swap or cap is optional; a rate cap becomes mandatory if the index equals or exceeds the all-in trigger rate (4.50% before, 4.75% after the spread-step conditions) for 30 consecutive days, capping at 5.00% / 5.25%. A required swap contract was in place and confirmed at the 2024 extension
Interest accrual method: 360-day year and actual days elapsed; the base-rate portion accrues on a 365/366-day year
Payment date: The 5th of each month in arrears; first payment 5 September 2019
Accrual period: The first London banking day of a month to the first London banking day of the next
Default rate: The lesser of the maximum legal rate and 4.00% above the otherwise applicable rate

Term

Amortization schedule: None — interest-only, with the entire principal balance due at maturity
Initial maturity date: 18 July 2024
Extended maturity dates: First extended maturity 18 July 2025; second extended maturity 18 July 2026
Extension options and conditions: Two one-year options. Notice 45–120 days before the then-current maturity; no default; debt service coverage of at least 1.25:1.00, curable by paydown, pledged cash or a letter of credit; extension fee and costs paid; a new beneficial-ownership certification if required; concurrent extension of the mezzanine loan; reaffirmed representations; the required swap contract extended; and loan-to-value of no more than 65% on an as-is appraisal dated within 180 days. The second option additionally requires at least 70,000 rentable square feet of the legacy space to be re-let, or the legacy sublease to run at least five years past the second extended maturity date
Status: The first option was exercised and confirmed on 18 July 2024
Prepayment restrictions: Prepayable in whole or in part on five business days’ notice with no premium, subject to consequential losses, and to spread maintenance only if prepaid on or before 18 July 2020

Covenants and controls

Financial covenants: Debt service coverage ratio of at least 1.10:1.00, tested at each quarterly determination date from 30 September 2020 — net operating income divided by debt service on the loan. Failure is an automatic event of default unless cured within 10 business days by cash collateral, a letter of credit or a principal paydown
Loan-to-value definition and testing: Principal Debt plus unfunded commitments, divided by appraised value; tested at each extension at no more than 65%
Permitted additional debt: Swap obligations, and unsecured trade payables and equipment leases of up to $2,000,000 paid within 60 days; anything else requires the Required Lenders’ consent
Cash management and cash sweep triggers: No lockbox or springing cash sweep appears in the loan agreement; the borrower maintains an operating account at the agent into which all rents are deposited, and the debt-service-coverage cure mechanism performs the sweep’s function
Reserve and escrow requirements: No standing tax, insurance or leasing reserve. Casualty and condemnation proceeds are held in the borrower’s deposit account pending the release conditions; debt-service-coverage cure deposits act as an ad hoc reserve
Financial reporting requirements and deadlines: Borrower: annual statements within 120 days of fiscal year end, quarterly within 60 days, with a compliance certificate at year end. Guarantor: audited annual statements within 150 days, quarterly within 60 days. Additional reporting on request within 30 days of period end
Events of default and cure periods: Scheduled debt service — no grace. Other payments — 10 days after notice. General covenants — 30 days after notice, extendable to 120 days if diligently pursued. Guarantor financial covenant — 15 business days. Unsatisfied judgment over $2,500,000 — 30 days; writ of attachment — 45 days. Bankruptcy — 90 days to dismiss an involuntary filing; termination of a tax-abatement agreement
Transfer and change of control restrictions: The sponsor must retain at least 25% ownership and control. Transfers creating a 20% new owner require 30 days’ know-your-customer notice; 50% requires the Required Lenders’ prior consent. Mezzanine-lender foreclosure transfers are permitted under the intercreditor agreement
Leasing and major lease approval requirements: Lease-approval safe harbour — a lease is deemed approved if it is on the standard form, arm’s length, no more than one floor, at least ten years, at least $145 per rentable square foot, with subordination and attornment and no unilateral early-termination right. More than one floor requires the agent’s approval; more than two floors requires the Required Lenders'
Insurance requirements: All-risk property cover at 100% of replacement cost including terrorism, flood where applicable, commercial general liability, workers’ compensation and contractor cover; carriers rated A or better; 10 days’ cancellation notice for non-payment and 30 days otherwise
Dated as of: 18 July 2019, current through the extension confirmation dated 18 July 2024

$65,000,000, fully funded in a single advance at closing, secured by a pledge of 100% of the equity in the mortgage borrower rather than by the real estate.

Parties

Borrower entity: Office Unit Mezz Borrower LLC, a Delaware limited liability company
Collateral: 100% of the limited liability company interests in the mortgage borrower, under a pledge and security agreement
Administrative agent / lender: Originally the senior loan’s administrative agent; assigned to an institutional investment trust, now sole lender and administrative agent
Guarantor: The sponsor

Guaranties, recourse triggers, liability limits and guarantor financial requirements

Non-recourse carveout guaranty: Loss-recourse carveouts for waste, fraud and misappropriation, unauthorised modifications to the mortgage, tax-abatement and lease documents; full recourse on a bankruptcy filing, a prohibited transfer, or a single-purpose-entity breach pleaded as a basis for substantive consolidation. Amended on 14 October 2022 to add the new sublease carveouts
Carry guaranty: Guarantees interest but not principal — spread maintenance, fees, taxes, insurance, condominium charges and swap breakage. Terminates on the earliest of foreclosure, deed in lieu, the tender date plus 90 days, or repayment in full
Leasing costs guaranty: Covers the sublandlord’s leasing-cost and landlord’s-work obligations under the legacy sublease, extended by amendment to the anchor sublease
Guarantor financial covenants: Net worth not less than $250,000,000; liquid assets not less than $25,000,000; cash from operations not less than $40,000,000 per fiscal year — identical across the carveout and carry guaranties
Breach consequence: A guarantor financial-covenant breach is an event of default, curable within 15 business days after notice

Pricing

Origination date: 18 July 2019
Fees: Extension fee of 0.20% of Principal Debt; $130,000 paid on the first extension; late charge of 4.0% after a 10-day grace period; $2,500 assignment fee
Maximum principal amount: $65,000,000, funded in one advance on the closing date
Interest rate type: Floating, interest-only
Index: One-month term SOFR (the CME term SOFR screen rate), replacing LIBOR with effect from 1 February 2023. Fallback is daily simple SOFR plus the same adjustment
Spread: 4.25% per annum as originally written, increased to 5.50% per annum from 6 March 2020 by the First Amendment — no later amendment moved it
Index adjustment: A credit spread adjustment of 0.11448%
Index determination date: Two U.S. government securities business days before each interest rate change date, which is the first business day of the month
Index floor: Zero
Interest rate hedging requirements: A rate cap becomes mandatory if the index reaches the 7.25% all-in trigger rate for 30 consecutive days, capping at an all-in strike of 7.75%. The Third Amendment conformed the trigger to the SOFR rate. A required swap contract was in place at the 2024 extension
Interest accrual method: 360-day year and actual days elapsed
Payment date: The 5th of each month
Default rate: The lesser of the maximum legal rate and 4.00% above the otherwise applicable rate; late charge of 4.0%

Term

Amortization schedule: None — interest-only
Initial maturity date: 18 July 2024
Extended maturity dates: First extended maturity 18 July 2025; second extended maturity 18 July 2026
Extension options and conditions: Two one-year options. Notice 45–120 days before maturity; no default; extension fee and costs paid; the mortgage loan concurrently extended; representations reaffirmed; the required swap contract extended. The second option additionally requires at least 70,000 rentable square feet of the legacy space to be re-let, or the legacy sublease to run at least five years past the second extended maturity date
Status: The first option was exercised and confirmed on 18 July 2024
Prepayment restrictions: No voluntary prepayment while the mortgage loan is outstanding, except simultaneously with a full mortgage payoff. Thereafter no penalty beyond consequential losses and spread maintenance, the latter only if prepaid on or before 18 July 2020

Covenants and controls

Financial covenants: No borrower-level debt service coverage covenant — the covenant section is intentionally omitted. The closing tests were loan-to-value of no more than 72.5% and an as-stabilised coverage ratio of at least 1.00:1.00
Loan-to-value definition: This facility’s Principal Debt plus the mortgage loan’s Principal Debt plus the mortgage loan’s unfunded commitments, divided by appraised value — so the mezzanine test is measured on the whole stack, not on the mezzanine piece alone
Permitted additional debt: None beyond permitted debt and the obligations without the Required Lenders’ consent
Cash management and cash sweep triggers: No mezzanine-level lockbox; cash management sits at the mortgage level and is reached by cross-reference
Reserve and escrow requirements: Casualty proceeds deposit threshold of $4,000,000, falling to zero during an event of default; a contraction payment account was added by the October 2022 amendment
Financial reporting requirements and deadlines: Mortgage borrower: annual within 120 days of fiscal year end, quarterly within 60 days. Guarantor: audited annual within 150 days, quarterly within 60 days. Additional reporting on request within 30 days
Events of default and cure periods: Scheduled debt service — no grace at maturity, otherwise 10 days after notice. General covenants — 30 days after notice, extendable to 120 days. Guarantor financial covenant — 15 business days. Bankruptcy — 90 days to dismiss an involuntary filing; a mortgage loan event of default is automatically an event of default here
Transfer and change of control restrictions: A broad prohibited-transfer regime; a 50% or greater change in ownership of the borrower or the mortgage borrower needs the Required Lenders’ consent, and the sponsor ownership requirements must be maintained. The Third Amendment consented to the transfer of the sponsor’s 100% membership interest in the borrower to a wholly owned holdings entity
Leasing and major lease approval requirements: The deemed-approval leasing protocol mirrors the senior facility; leases of more than two floors require the Required Lenders’ approval. The October 2022 amendment added the anchor master lease and sublease consents
Insurance requirements: Per the loan agreement’s insurance section, with flood cover required if the property sits in a special flood hazard area
Dated as of: 18 July 2019, current through the extension confirmation dated 18 July 2024

Intercreditor position

Subordination: Payment and lien subordination to the senior loan, but the mezzanine lender’s first-priority interest in the pledged equity is not subordinated
Cure rights: Monetary cure period of 10 business days after the later of receipt of a senior loan default notice and expiry of the borrower’s own cure period; non-monetary cure period of 30 business days, extendable with diligent pursuit
Purchase option: On a purchase option event — senior default, acceleration, an enforcement action or borrower bankruptcy — the mezzanine lender may buy the senior loan at par plus accrued interest, advances and costs, subject to a minimum 30-day purchase election standstill
Transfer of the equity collateral: Foreclosure on the pledged equity requires the senior agent’s consent unless the transferee is a qualified transferee and the related conditions are met
Bankruptcy standstill: The mezzanine lender may not direct the borrower or its principals into bankruptcy while the senior loan is outstanding

$190,000,000 — the residual between the assumed property value and total debt. This is a derived figure, not a stated one: no equity instrument, capital account or subscription amount for this ownership chain appears in the document set.

Derivation

Assumed property value: $575,000,000 — supplied as an instruction for this analysis. It is not an appraised value taken from the documents, and no concluded value appears in the December 2024 appraisal excerpt in this set.
Less: senior mortgage loan: $320,000,000
Less: mezzanine loan: $65,000,000
Implied common equity: $190,000,000 — 33.0% of assumed value
Implied value per rentable square foot: $2,679, on 214,600 rentable square feet

What sits at this level

Ownership: The sponsor’s 100% membership interest in the mezzanine borrower was transferred to a wholly owned holdings entity with the mezzanine lender’s consent in January 2023
Sponsor: The sponsor stands behind the stack as guarantor on all six guaranties across the two facilities
Equity documents: No joint venture, limited liability company or partnership agreement for this ownership chain is in the document set, so there is no distribution waterfall, promote or capital-call mechanic to report.

Constraints on the equity

Structural subordination: Common equity sits behind the pledged equity collateral: a mezzanine foreclosure on the membership interests in the mortgage borrower wipes out this position without touching the senior mortgage
Transfer and change of control restrictions: The sponsor must retain at least 25% ownership and control of the mortgage borrower; a 20% new owner triggers a 30-day know-your-customer notice and a 50% transfer requires the Required Lenders’ consent. The same restriction applies at the mezzanine level
Distributions: Loan proceeds were permitted to fund a return of equity to the borrower for distribution to its direct and indirect owners at closing under both facilities
Recourse exposure: Notwithstanding the non-recourse structure, the sponsor carries net worth of $250,000,000, liquidity of $25,000,000 and cash from operations of $40,000,000 as maintenance covenants for as long as either loan is outstanding