Comparing a $342/sf CBD office recap against a $92/sf suburban deal with a reserve that looks a third short

On Deal A, ask who actually runs the amenity floor and what it costs. Prime buildings win tours on fitness, conferencing and food service, and those are operated either by building staff or by a contracted operator with a subsidy line in the budget. I've seen amenity subsidies run $0.75 to $1.50 a foot on a building that size, which comes straight out of your 6.1 cap if the sponsor put it below the NOI line.

Same question in reverse on B. A 1997 suburban building with no amenity offering competes on price only, which is exactly the fight you don't want to be in.

The interesting thing about B is that all cash at close removes the thing that's killing most secondary office right now. Office CMBS delinquency hit 12.34 percent in early 2026, an all time high, and almost none of that is buildings without loans. It's buildings whose loans matured into a market that won't refinance them at the old basis. So B has no maturity date to fail. It has a leasing date to fail, which is slower and more survivable. Deal A is the one worth stressing. 55 percent loan to cost sounds conservative until the question turns to what the refinance test looks like in year five at whatever rates exist then, on a building where two big rollovers land right before the exit. Ask for the lender's actual proposed terms in writing, and ask whether there's a cash trap or a debt yield covenant that starts diverting distributions if occupancy slips below a threshold. Those covenants are where LP cash flow disappears first, and the terms differ by lender, so the real document matters more than the summary page.

Construction answer on B. People underestimate what it costs to make a 1997 building feel current. Restrooms and elevator cabs are the two things every tenant rep notices, and on a four-story 165,000 footer that's $1.2M to $1.8M for those alone in most markets. Add a lobby and a spec suite program and the $3.9M is gone before @devon_pierce's leasing math even starts. Also check the floor plate depth and the window line. If it's a deep plate with a narrow ribbon window, you can't lay out the open plan with glass fronts that tenants want, and you can't convert it to residential later either because too much of the floor is far from daylight. That single measurement decides whether the building has a second life or not.

The two offerings are priced off different questions, and you should test them separately rather than picking a winner.

Deal A is a bet on rent growth in prime space. The mechanism is real. CBRE expects available prime space to get scarcer through the end of 2026, and where prime tightens, demand spills into the next tier in early-recovery markets. What matters is whether the 6.1 going-in cap already capitalizes that expectation. Test it by asking for the in-place rents on the 2028 and 2029 expirations against current asking net effective rents in that submarket. If in-place is already at or above net effective market, the 12 to 15 percent mark-to-market is an assumption rather than a measurement, and your return depends on rent growth that hasn't happened yet.

Deal B is a bet on absorption in secondary space. National office vacancy sitting near 18 to 19 percent with modest improvement, and net absorption in a recent quarter at its strongest in four years, describes the aggregate. It says nothing about one building's competitive set. @ryanmck27's net effective framing is the right unit of measure, and the question underneath it is whether that building is next-tier space benefiting from spillover or obsolete stock competing on price against other obsolete stock. Vacancy in the four closest comparable buildings, and their spec suite inventory, answers that better than any market report.

On the reserve, your arithmetic is the standard failure point in secondary lease-up underwriting. Renewal packages on existing tenants are real capital, typically $20 to $35 a foot plus commissions even when the tenant stays. A reserve sized only for new leasing runs dry at the first renewal cycle, and then the sponsor is asking you for money at the worst moment. Ask what happens on a capital call and what dilution applies if you decline. That's a documents question for your own attorney.

I'm reading this twice and I still want to check one plain thing. If net effective rent on the secondary building is 59 percent of the face rent, does the pro forma NOI in the offering use the face number? Because if it does, then the income line is describing money the building never actually receives, and I don't understand how anyone signs those.