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Key Assumptions
| Asset Type | Office |
| Market | Austin, TX |
| Purchase Price | $14,200,000 |
| Cap Rate In | 6.1% |
| LTV | 68% |
| NOI Year 1 | $866,200 |
| Hold Period | 7 years |
| Exit Cap Rate | 6.6% |
| Debt Rate | 6.50% |
| Vacancy | 7% |
Primary Risks
Exit cap of 6.6% against entry of 6.1% represents 50bps compression. Office absorption in Austin softening; cap rate spread to treasuries compressed.
DSCR estimated at 1.31x. Adequate cushion at current debt rate but sensitive to rate increases at refinance.
Austin office market remains liquid with institutional buyer depth, though transaction velocity has slowed in the 50,000–100,000 SF segment.
13.2M SF of office under construction in the Austin MSA. New deliveries concentrated in Southeast submarket, proximate to subject.
IC Memorandum Narrative
IC Memorandum — Riverside Commerce Center
Executive Summary
Riverside Commerce Center is a 98,400 SF Class B office asset located in Southeast Austin, TX. The CRE Signal Risk Index™ scores this acquisition at 39 — Moderate, reflecting adequate structural underwriting offset by supply-side pressure and mild exit cap compression risk.
Deal Assumptions and Structure
The acquisition is structured at a 6.1% going-in cap rate on a $14.2M purchase price, implying an NOI of $866,200 in Year 1. LTV of 68% at a 6.50% debt rate provides a 1.31x DSCR — above the 1.25x institutional floor but without significant margin. The 7-year hold and 6.6% exit cap represent a conservative 50bps compression assumption.
Primary Risk Factors
Exit Cap Compression (Medium Confidence): The 50bps spread between entry and exit cap rates is the primary source of score elevation. Office cap rate spreads to 10-year treasuries remain compressed historically, and the Austin market has seen softening buyer demand in the sub-100K SF segment over the trailing two quarters.
Supply Exposure (Medium Confidence): 13.2M SF of office space is under construction across the Austin MSA, with meaningful deliveries in the Southeast submarket through 2026. This supply concentration could pressure rents and occupancy assumptions during the hold.
Stabilizing Factors
Conservative LTV (68%) provides structural cushion. Class B office in Austin maintains strong tenant demand from professional services and regional headquarters. In-place tenancy is diversified across three tenants with staggered lease expirations.
Macro Signal Context
Two active CRE Signal macro alerts are cross-referenced to this deal: (1) rising office vacancy in Sun Belt secondary markets, and (2) softening rent growth projections for office in high-supply corridors. These signals are reflected in the score.
Recommendation Framework
Score: 39 — Moderate. Standard IC review cadence is appropriate. Stress test recommended: (1) exit cap at 7.0% (100bps compression) to validate residual value floor; (2) Year 3 occupancy at 85% to model supply absorption impact on NOI. No structural deficiencies identified that would preclude approval under current assumptions.
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*Generated by CRE Signal Engine v2.0 (Institutional Stable). Deterministic scoring — identical inputs produce identical outputs.*
Generated by CRE Signal Engine · 2026 · Not investment advice