Silicon Valley Office Asset Obtains $155M Refi

Coleman Highline. Image courtesy of Hunter Storm

Sansome Partners and Hunter Properties have secured a $155 million loan package for the refinancing of a segment of Coleman Highline, an approximately 1.7 million-square-foot mixed-use development in the pandemic-resilient tech town of San Jose, Calif., according to the Commercial Observer. Goldman Sachs and Deutsche Bank originated the financing for the Silicon Valley asset.

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Coleman Highline is a sprawling live-work-play destination that will ultimately feature eight mid-rise office towers totaling approximately 1.5 million square feet, three amenity buildings encompassing an aggregate 53,000 square feet, a 175-key Element hotel, a public retail building and 1,600 residential units. As noted in the Commercial Observer article, the refinancing came in the form of CMBS debt that is part of the $630.8 million DBJPM 2020-C9 Mortgage Trust transaction.

Moody’s Investors Service details the Coleman Highline financing in its August 17, 2020, credit opinion on DBJPM 2020-C9 Trust, which is backed by a pool of 30 loans secured by 146 commercial properties. Of the $155 million Coleman Highline financing, a $30 million fixed-rate loan with an interest rate of 2.8 percent is part of the pool, with the remaining $125 million consisting of five pari passu senior notes to be contributed to future securitizations.

Coleman collateral

According to Moody’s, the Coleman Highline financing is secured by Phase II of Coleman Highline, which consists of the approximately 194,800-square-foot Building 3 and the 163,300-square-foot Building 4 office structures, as well as the 22,900-square-foot Building A2. “The properties are Class A office buildings designed to the highest quality standards by Gensler. Building A2, the amenities building, features dining options, conference rooms and an auditorium,” according to the Moody’s document.

Hunter Properties’ development arm Hunter Storm LLC delivered all three structures in 2020 at a development cost of $249.1 million, and all three are leased to streaming platform Roku Inc. under a triple-net lease agreement featuring an expiration date in 2030 and the option for one seven-year extension. Roku now maintains a global headquarters at Coleman Highline encompassing two additional buildings from Phase I for a total footprint of roughly 738,000 square feet.  

Moody’s cites a handful of strengths supporting the Coleman Highline financing, including asset quality, tenancy, sponsorship and the all-important location. “The Coleman Highline property benefits from being positioned across a pedestrian bridge from the Santa Clara Caltrain station, the most widely used mode of public transit between San Francisco and San Jose,” in Moody’s opinion. Additionally, the property sits within the San Jose Airport submarket, which, according to a report by Cushman & Wakefield, was one of only two submarkets in Silicon Valley to see an increase in office rents in the second quarter of 2020.