Case Study
REIT Capital Recycling: Suburban Office Disposition
The Deal
You are a credit analyst at Ridgeline Commercial Bank evaluating an acquisition loan request from Sentinel Ridge Capital, LLC, a private real estate investment firm under contract to purchase Westgate Corporate Center, a stabilized, 89%-leased suburban office building, from Beacon Diversified REIT, Inc. Beacon's most recent quarterly filing disclosed a strategic shift toward industrial and logistics acquisitions, funded in part by dispositions of non-core suburban office holdings, and Westgate is one of the assets Beacon has marketed for sale under that program. Review the seller's offering memorandum and the buyer's indicative bank term sheet to work through why a REIT would sell a currently cash-flowing asset, value the property from its disclosed NOI, identify the lease that drives near-term risk, and judge whether the proposed acquisition financing is properly structured against that risk.
You’ll Practice
- Interpret a REIT's capital recycling rationale for selling a stabilized, cash-flowing asset to fund acquisitions in a different property sector
- Calculate NOI from an offering memorandum's income and expense summary and derive an implied cap rate from a disclosed sale price
- Identify which tenant's lease expiration drives near-term rollover risk from a rent roll and connect it to lender-imposed reserve requirements
- Size an acquisition loan under a stated LTV constraint
- Judge whether a bank acquisition loan's term, rate structure, and recourse burn-off are properly matched to an asset's near-term leasing risk