For office debt, the lease is now the collateral

Office lending has reached a point where the lease is doing the work the building used to do, and the $250 million CMBS refinancing of 777 Hidden Ridge — a 1.1 million-square-foot Irving, Texas, asset owned by PRP Real Assets and Riyad Capital — prices exactly that bet, according to Connect CRE.

Bank of America originated the two-year, interest-only note with three one-year extension options, Commercial Search reported via Connect CRE, replacing a $253.8 million Citizens Financial Group loan from 2019 that had been set to mature in 2029.

KDC and Verizon delivered the building in 2019 on a build-to-suit basis for Pioneer Natural Resources USA, and PRP and Riyad bought it that same year; Pioneer signed a 20-year triple-net lease running to 2039 with no early termination and no contractual outs for the remainder of the term. Pioneer has since left, but the lease remains in force and Pioneer is now looking to sublease the space; the 10-story building counts a six-story parking garage with 2,569 spaces among its amenities.

The trade prices the contract rather than the occupancy, and this refi is a clean example of the broader move from mark-to-market to trade-to-trade in office underwriting — a shift this publication has argued sets the clearing price by the lease rather than the lobby. The borrower's equity is still the building; the lender's math runs off a promise that does not depend on who is at the desk today.

The structure buys runway: two years of interest-only payments plus three one-year extensions gives the sponsors as much as five years before the note matures, while Pioneer's obligations remain on the books and the building sits vacant, with no principal paid down as Pioneer markets the sublease. The lease runs to 2039, so the sublease market, rather than the property market, will decide how this story ends.

PRP, meanwhile, has spent August building out its platform, adding Cole Cook for multifamily acquisitions and Liat Cherkes-Bishko to lead capital formation.

For a CMBS buyer, the appeal is a triple-net lease with no out: contractual cash flow. The risk is the tail — a lease that outlives the note and a subtenant who has to be found before the extension options run out. Pioneer has until 2039 on paper; the sponsors have as much as five years to find the subtenant the structure assumes.