One page, two columns: when every lease ends and when the loan ends

I've put money into three passive office deals. The first one I said no to for a reason I can explain in a paragraph, and the two I said yes to have both paid so far, so I want to write down the page that did the work.

Take a sheet. Left column, every lease in the building with the square footage and the month it expires. Right column, the month the loan matures. That's it.

On the deal I passed on, 62 percent of the building's square footage expired within seven months of the loan maturity date. That means the sponsor would be negotiating a refinance while the lender was looking at a rent roll that might be about to empty out. Lenders size loans off in-place income and remaining lease term. Walking into that conversation with a short weighted average lease term is how a refinance turns into a capital call.

Weighted average lease term, sometimes shortened to WALT, is just the average number of years left on the leases weighted by how much space each one takes. A building at 3.1 years of WALT with a loan due in 3 years is a different animal from the same building at 6 years of WALT.

On the two I funded, the largest tenant expired 26 and 41 months after the loan matured. Nothing clever about that. It just means the refinance and the re-leasing don't happen in the same quarter.

Deal one has paid a 6 percent preferred distribution quarterly for nine quarters. Deal two paid nothing for two quarters during a lease-up, then started. That's fine, it was disclosed.

If a sponsor can't give you the expiry schedule in a form you can build this page from, that itself tells you something.