My preferred equity in a Columbus office conversion just got paid back full plus carry and I was not expecting clean on this one

The abatement point is the one I would underline twice. A 15-year real property tax abatement on a Columbus conversion can shift net operating income by 15 to 20 percent depending on the millage rate and the assessed value post-stabilization, and that spread is what compressed the exit cap enough to clear your position without a haircut. The sponsors who close that negotiation before construction starts are doing something qualitatively different from sponsors who list "potential abatement" as an upside line in the pro forma. You effectively had a structured NOI floor built into the exit, not a projection.

The risk I do not see addressed in your post is what happens to that abatement if the property transfers. Many municipal programs in Ohio tie the abatement to the entity that applied for it or to a specific use commitment, and a sale can trigger reassessment or abatement clawback depending on how the development agreement was written. If you had needed to exit early through a forced sale, say the sponsor hit a liquidity event or the senior called the loan, the buyer's cap rate assumption would have had to price the possibility that the abatement does not convey, which would have compressed your recoverable value at exactly the wrong moment. The intercreditor you mentioned never needed to be tested, but the scenario worth thinking through on the next deal like this is whether the abatement is assignable and whether that assignability is confirmed in the city agreement, not just assumed in the model. Did you get a copy of the abatement agreement itself during diligence, or were you working from the sponsor's summary of the terms?

The abatement is doing the most work in this deal and you named it at the end, which is the right place to put it in hindsight but the wrong place to have it in your underwriting framework going forward.

A 15-year abatement on a 1960s vintage conversion changes the stabilized NOI picture substantially enough that the exit cap tolerance widens meaningfully. If that abatement had been contingent, delayed, or structured with clawback provisions tied to affordability set-asides, your second-position preferred equity was in a different conversation at exit. The fact that it was already negotiated before you came into the stack is exactly why it held, but that sequence was sponsor-specific. Most decks you will see on similar vintage office conversions will show the abatement as "anticipated" or "in discussion," and that is a categorically different underwriting input than executed.

The 8 percent contingency line is also worth examining. You read it as conservative relative to Phoenix and DFW comps on square footage, and it turned out to be right, but the mechanical chase issue they hit post-demo is precisely the risk that 1960s commercial stock carries. Buildings from that era often have vertical utility runs and structural elements that do not show up in Phase I documentation or pre-demo inspection. An 8 percent contingency absorbed 60 percent in a scenario where the problem was found early enough to be managed. Found later, or larger, the schedule slip extends and the carry clock becomes a different negotiation.

The 91 percent lease-up in 8 weeks against your pro forma skepticism suggests the Columbus submarket absorbed the unit type well. That is worth tracking as a signal, not just a result.

What was the structure of the abatement, specifically whether it was tied to tenant income restrictions or was a straight property tax phase-in?