Carl Zeiss Building
Single-Property Fund #6
This property, located in Dublin, California, just east of San Francisco, was purchased in September 2002 at a total price of $37.3 million, including all closing costs and reserves. The property was occupied by Carl Zeiss, Inc. under an original 20-year lease that was guaranteed by the Carl Zeiss Stiftung of Germany. There were 17 years remaining on that lease at the time of purchase of the property. A first mortgage of $25.3 million, equal to 70% of the purchase price, was obtained from Credit Suisse First Boston on an interest-only basis for seven years. Foreign investors came into this transaction through a portfolio loan that paid 10.35%. Other investors structured their investments as equity and earned a 10.1% income return.
In keeping with the original investment strategy for this property, the Zeiss Building was to have been sold in 2009 after having been held for seven years. However, because of the depressed state of the real estate market in 2009, Falcon elected to continue to hold the property and will reconsider possible sale when the market improves. Based upon our analysis, a sale of the property in 2015 on a 9.5% cap rate, would yield enough for repayment of both the portfolio loan and equity invested in the property, including all interest and quarterly payments to the equity investors then due. Continued retention of the property was possible since the first mortgage had a final maturity date in October 2032.