The one page that separates a passive office deal worth funding from one worth passing on

For a passive investor evaluating office deals, one simple exercise does most of the diligence 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 the whole test. A deal where 62 percent of a building's square footage expires within seven months of loan maturity puts the sponsor in the position of negotiating a refinance while the lender is looking at a rent roll that might be about to empty out. Lenders size loans off in-place income and remaining lease term, and walking into that conversation with a short weighted average lease term is how a refinance turns into a capital call. Weighted average lease term, often shortened to WALT, is 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 materially different risk than the same building at 6 years of WALT. A cleaner structure has the largest tenant's lease expiring well after the loan matures, commonly two to three years out, so refinancing and re-leasing don't collide in the same quarter. Preferred distributions on healthy deals like this can run around 6 percent quarterly, though a lease-up period can mean a quarter or two of nothing before payments start, which isn't itself a red flag if it's disclosed up front. If a sponsor can't produce the expiry schedule in a form that supports this exercise, that alone says something worth weighing.