So we’re still doing office buildings, and I know there’s a lot of noise around office buildings. But we are still seeing good leasing activity on the office parts of our portfolio. And it’s not because the world is out there running to buy office space and there is a giant competition to rent office space, but it’s because we’ve got the best properties and markets or sub-markets and the transactions that we’ve done makes sense and there is demand for those.Now is leasing slower than it was four years ago or five years ago or three years ago before COVID? Yes, it is. We’ll give you that. But we are seeing decent leasing velocity and loans on office buildings paid off because the office buildings are leasing up and moving on, it is slower, but they are getting there.The second thing I would tell you is there’s a lot of conversation about CMBS and the wave of maturities and all property types office gets talked about a lot coming from CMBS.
And that’s not our market and those are not our type of properties. I understand that there is going to be some challenges in commercial real estate from CMBS loans that have a 3% or 4% interest rate that are maturing and now are going to refinance at a 7% or 8% interest rate or maybe even higher. That’s going to put a lot of those projects into ditch.A lot of those projects will spill work though because over the ensuing five years or seven years or 10 since that loan was originated and put into CMBS, there has been substantial amortization on that loan and substantial increases in rents. But those are older properties. They’re not new state-of-the-art properties. They are not going to buy and large benefit from a flat to quality sort of attributes that there are developers of new properties enjoy.So they’re going to be harder to lease up, if they’re not already leased than a new state-of-the-art properties that has all the desirable amenities that people want to be in.
And the current employment environment where employers are trying to get employees to come back to work, they desperately want them to come back to work. For the most part, they are trying to get them to come back to work. The quality of the office environment is critically important in that regard.If you got really nice offices that people like and they have the amenities and the attributes that people want and going to the office is a pleasant experience because you like where you work, that is — that’s a valuable tool in recruiting people. Our sponsors who are building these new state-of-the-art office buildings understand that.And if you’ve got an old B grade building, you’re probably looking to get out of that, that’s not our customer.
You’re probably looking to get out of that building and get into a place where you can recruit better talent, even though your cost per square foot is going to go up a lot to be in that nicer building. So we think we’re very well positioned in this market.Manan Gosalia Great. I appreciate the detailed answer. Thank you.George Gleason Thank you.Operator Thank you. One moment for our next question, please. Our next question comes from the line of Brody Preston with UBS. Your line is now open.Brody Preston Hey. Good morning, everyone. Thanks for taking the questions. I’ve got a handful of them, but I’ll just ask a few and then hop back into the queue and maybe ask them at the end. I did just want to follow up maybe with Brannon on the loan that’s been repossessed.
I wanted to ask if you could give us any color as to geographically, where it’s located. And then secondarily, is it a straight land loan or has it been developed to any extent where a potential buyer might have to think about repurposing anything that’s been done to suit their needs for a new project?George Gleason Brannon?Brannon Hamblen Sure. Glad to answer that, Brody. This loan is in the West Coast, it’s in LA. And as George has said, it is a phenomenal site. I mean, it’s right in the heart of the sort of entertainment culture there. So I think we all fully expect that one day, there is going to be a phenomenal vertical development on that piece of dirt.As to your question around repurposing, I think the heart of your question, work to undo not so much.
I mean, look, the prior sponsor purchased that site in 2012 and it’s been a decade on entitlements and just sort of pre-development. But late in the game, they’ve put a ton of equity in it. I think their cost basis was around $105 million. So they’ve spent a lot of time on it, but then got to a point where we’ve talked about rising cost, we talked about rising interest rates and things of that nature and they decided not to take that step forward to go vertical.So there is — there’ll be a plan for a great, great vertical development on that site. There’s not a lot of work that’s being done to specifically answer your question. As we said, we feel good about marketing that thing. It’s just, as George said, picking the right time when things are a little bit more certain, a little bit more stable under the new owner’s fee.Brody Preston Got it.
Does the — does all the — I guess, do all the permits and all the stuff that the previous owner has done, does that stay in place and does that help make it more attractive for a potential buyer?Brannon Hamblen I think so. And of course, you can’t make promises about what ultimately they put there and whether they have to do some things. But as George said, we’ve had some unsolicited interest in the site. There is no question in our mind about its viability for a great development going forward.Brody Preston Okay. Got it. Thanks for that. Could you just — this is just a ticky-tack on this loan, but could you just help me like ring-fence what the loan yield is? I’m just trying to think about the slight loss to earnings here as it relates to this loan.Brannon Hamblen I don’t know the exact rate that we had on that one.
It was an older loan and it’s a floating rate, so it’s been up there, but — so all the loans that we’re replacing it with today.George Gleason Brody, I assume 8% right on it, that’s kind of the norm. So that would be $4.8 million year, $1.2 million quarter in interest income.Brody Preston Got it. Thank you very much. And then I did — okay. I did want to ask just on the updated appraisals that you had for the 15 properties or so. Just a couple of questions on that. One, what kind of drove the re-appraisals, if there was any kind of one thing if you could help us understand that? And then two, should we expect more appraisals going forward? And I think a lot of us are maybe focused on maybe the office. So it was just one office reappraisal there.
But should we expect more of that just given the tougher office environment?Brannon Hamblen Sure. Good question.George Gleason Go ahead, Brannon.Brannon Hamblen Yes, let me take this, George. Absolutely. In terms of what drives these appraisals, we’ve — as we’ve talked about before, we really stay on top of our risk migration in the portfolio and it’s sort of a natural evolution. Nothing was really driving these appraisals more than the natural place in the lifecycle. We have, as we said, typically a three-year loan would be standard and then we’ll have renewal options that typically have some sort of economic hurdle to get over to allow the borrower to extend the loan and that always I think virtually every deal has an appraisal requirement.
So these were typically at the point of maturity and extension. I don’t know for sure there may have been some other reasons in here. But that’s generally what you will see, and this was normal course appraisals.In answering your second question around future appraisals, you’ll see more of those normal course appraisals as loans hit their initial maturity and look for extension, and then I would assume that they will probably be a similar velocity, that velocity is going to follow historic origination roughly three years ago. But if there was any reason, sometimes we have a reason to upsize a loan, and if we were going to do that, we’d, of course, get another appraisal then to understand the LTV at that point in time. But that’s generally the background for the appraisals you see here in this figure and then what you’ll see or hear about in the future.Brody Preston And that’s just — that’s an extension just because they’re still in the construction phase, correct?Brannon Hamblen They may be in construction, they may have just completed construction and entering the lease-up phase, it varies depending on the situation.Brody Preston Got it.
Okay. And then I’ll just ask one more before I hop back in the queue. George, obviously, for the last few years, I think RESG has been, I guess, a point of debate amongst the investment community. And so I’m asking, you never want to see a loan go bad, but just given that this loan is relatively small in size or some of the other RESG loans, do you kind of look at this as like an opportunity to kind of maybe prove to some of the folks that have been more negative on the RESG strategy like we can take a land loan, underwrite it really well and come out with potentially no loss on it in a pretty stressed environment? Do you think that, that would be — do you think perversely, this credit could wind up being beneficial to the story going forward?George Gleason Brody, perhaps, I don’t know that you guys — I find it an amazing thing that people debate the merits of RESG and the quality of that portfolio.
