A suburban office syndication bought for income that produced thirty months of almost none, worth studying
Worth studying as a case on how office syndications can go quiet. Take a $85k investment in a three story suburban office building, roughly 62,000 square feet, purchased at what was described as a great basis and 76 percent leased at close, with quarterly distributions projected starting month four. Two distributions arrive. Then a letter. Here is how a case like this typically unfolds. The largest tenant, around 19 percent of the building, has a lease expiring roughly 14 months after close. The sponsor's plan assumes renewal at a modest bump. Instead the tenant shifts to two days a week in office, renews for half its space at a lower rate, and hands back a suite that needs demolition before it can even be shown, since the old layout was all private offices that nobody wants anymore. That is a downsizing renewal: it looks like a renewal on the rent roll, but it is a real cash loss. Then the interest rate cap expires, debt service rises, and distributions drop to zero and stay there. A capital call notice around 30 months in, say $9k, gets declined, diluting the position. The sponsor's updated timeline points toward stabilization years out. Total picture: $85k in, a few thousand out, a diluted position, and real uncertainty about current value. The lessons generalize cleanly. Read the rent roll expiration schedule before the projected return page. Ask what percentage of rent rolls in the first 24 months, and what the sponsor assumes about each of those tenants by name and square footage. And ask specifically what reserve exists for retenanting rather than trusting that a low price per foot covers it, because a cheap building in office is often cheap precisely because it costs a fortune to keep leased.
