Sempra Energy Headquarters Building
Purchase Transaction
The purchase transaction from The New England Mutual Life Insurance Company in 1994 designed by Mr. Shapery, involved purchasing the property in two stages effected almost simultaneous acquisition of the building improvements separate and apart from the land. Mr. Shapery created a single purpose entity to acquire the building improvements which also included a triple net bond lease from the tenant San Diego Gas and Electric Company (later to become Sempra Energy Corp.) with a remaining term of 12 years on the original lease which also contained 4 additional 5 year options at market rent. Mr. Shapery secured the lease, leasehold improvements and all of the income as collateral for approximately 17 million dollars in bond financing to Minnesota Mutual Life Insurance company with a 12 year amortization retiring the bonds by the end of the original lease term. At the time of the sale of the bonds Mr. Shapery did not own the land as it was being leased by Mr. Shapery from the seller with an option to purchase. The option could be exercised by Mr. Shapery at any time after the sale of the bonds for a mortgage indebtedness in the approximate amount of 5 million dollars secured by a purchase money first trust deed and note at 7% but with interest accruing so long as the bonds were unpaid due to the fact that the bond holders had all of the project rental income assigned. The seller, a public company receiving a first trust deed allowed them to book the transaction as an all cash deal for reporting purposes. This resulted in the acquisition by Mr. Shapery of a 22 million dollar fully lease high-rise office project with no cash capital investment. Several years later the project was refinanced, the bonds were defeased and the first lien on the ground retired.