A Weekly Report of Property and Credit Market Conditions and Real Estate Investment Opportunities
In this week's issue:
- CB Richard Ellis, CBRE Realty Finance splitting ways.
- ING Clarion raising $1 billion for debt fund.
- Jones Lang LaSalle to target banks, distressed assets.
- Adler Group forms $100 million property fund.
- New distressed condo buyer formed,
- Dying to get out.
- Ike Takes A Bite Out of FSP Phoenix Investors.
- Plus, we give you the latest properties on the Watch List: Specially Serviced in: Pomona, Burbank, Millbrae and Concord, CA; Colorado Springs, CO; Bradenton and Fort Myers, FL; Saginaw, MI; Asbury Park and Montague, NJ; Upper Dublin Township, PA; Waco, TX.
Editor's Note: Loans of Concerns
We've added a new feature to Watch List this week:
Watch List: Loans of Concern. Readers have been asking for some time for information on properties experiencing operational issues but that have not gone into special servicing. That's what we give you with Loans of Concern. This week's issue, includes properties in: Los Angeles and West Covina, CA; Washington, DC; Riverdale, MD; Rosedale, MN; Raleigh, NC; and Brownsville, TX.
The properties identified on this list have not gone into special servicing and are not delinquent or in default in their loan repayments. However, they have been identified in the past week by various bond rating agencies as loans of concern within a CMBS portfolio. We identify the properties and give you the rating agency comments on these properties.
There is one catch. You can only this get this report (and all of the stories included in this column, too) by downloading the file in Adobe pdf format.
You can download the file here. With the pdf version, you also get news of an upcoming property auction in Alma, MI, being offered by Williams Auctions.
CB Richard Ellis, CBRE Realty Finance Splitting Ways
CB Richard Ellis Group Inc. is cutting management ties with the financially struggling CBRE Realty Finance Inc.
As announced in prior quarters, CBRE Realty Finance hired Goldman Sachs to evaluate a range of strategic and operational initiatives including a possible sale of the company, merger or other business combination, capital investment and/or other strategic alternatives. After exploring each of these alternatives, the company's board (headed by CB Richard Ellis chairman Ray Wirta) has decided its time to internalize management.
As mutually determined CB Richard Ellis' management agreement will not be renewed when it expires Dec. 31.
As such CB Realty Finance will have to drop the 'CB' from it name to become just. Realty Finance Corp.
ING Clarion Raising $1 Billion for Debt Fund
ING Clarion Capital is sponsoring its third commercial real estate debt investment fund, ING Clarion Debt Opportunity Fund III, with a goal of raising $1 billion.
The opportunity fund will invest in high yield commercial real estate-related debt investments. ING is projecting base case net returns of 16.8%, with the upside scenario of 21.8% and a downside scenario of 2.1%.
ING Clarion Capital has made good progress in its initial fund raising goal. The South Carolina Retirement System has agreed to invest $100 million in the fund. The Contra Costa County Employees' Retirement Association approved a $75 million investment. The Arkansas Teacher Retirement System approved a $30 million investment. Los Angeles City Employees Retirement System committed $25 million.
Jones Lang LaSalle To Target Banks, Distressed Assets
Jones Lang LaSalle is creating a new special services division to address the operational and occupancy needs of banks and insurance companies; assist financial institutions with challenged assets and liabilities; provide receivership services to lenders, loan services and financial institutions; help public-sector entities raise cash to meet budget shortfalls from assets they have acquired from financial institutions; assist owners of distressed properties with leasing and recapitalization strategies; and assist occupiers with identifying ways to create value with their occupancy requirements and manage the negotiation risks in this challenging environment. (cont'd)
(JLL cont'd) "It is clear that the fundamental changes that have occurred in the global financial system in recent weeks are having major ripple effects on the broader economy and, in particular, the commercial real estate sector," said Peter Roberts, CEO, Americas Jones Lang LaSalle.
Adler Group Forms $100 Mil. Property Fund
Adler Group has formed its first discretionary fund to purchase of income producing commercial properties. The $100 million fund, seeded by a major European investor, is named Helios AR Real Estate Fund I.
The Helios AR Real Estate Fund I will invest in multi-tenant office, flex, industrial and retail properties and other real estate related investments in the Southeast and Mid-Atlantic regions of the United States.
Adler Group expects to place the equity in the next 18 to 24 months but has already made two significant acquisitions, including Breckenridge Park in Tampa, FL, a 15-building, 332,582-square-foot Class A mixed-use complex.
Adler Group's co-manager for the fund is Assos Capital USA LLC, an affiliate of Assos Capital Ltd.
New Distressed Condo Buyer Formed
California Capital Real Estate Advisors Inc. (CalCap), a private real estate investment and financial services firm, has been recently formed. The three principals are: former mortgage banking executives Ed Aloe and Mark Mozilo and commercial real estate broker Pat Wakeman.
CalCap is an independent, privately owned firm, providing real estate investment, liquidity and management services. CalCap's primary focus is on distressed condominium projects, both ground up and conversions, in California, Arizona and Nevada.
"Traditional lending sources have severely tightened their underwriting criteria in the last year, which has made it difficult for individual condo buyers to get financing," Aloe said. "Couple this with rapidly declining values, and you have a perfect storm for stalled and failed projects."
The CalCap team has been raising assets, building brand identity, and connecting with prospective partners and clients. The firm has recently bid on six different notes secured by such properties.
Dying To Get Out
Capital Southwest Corp has retained Raymond James & Associates as its financial advisor to explore various strategic alternatives for its wholly owned portfolio company, Lifemark Group, including a potential recapitalization or sale of Lifemark.
Lifemark Group, based in Hayward, CA, owns and operates cemeteries, funeral homes, mausoleums and mortuaries. Its operations, all of which are in California, include properties in San Mateo, Oakland, Hayward and Sacramento.
Ike Takes A Bite Out of FSP Phoenix Investors
Franklin Street Properties Corp.'s FSP Phoenix Tower Corp. has decided not to pay a dividend for the third quarter ended Sept. 30, due to a reduction in cash flow.
FSP Phoenix Tower owns Phoenix Tower in Houston, TX, at 3200 Southwest Freeway. The 34-story office tower contains 629,000 square feet of rentable area.
FSP Phoenix said the cash flow problems stem from the reduced occupancy at the property since Washington Mutual vacated its premises upon its lease expiration in March of 2008. The building is approximately 67.87% leased.
The second factor, FSP said, was entirely unanticipated: the cost that has been and continues to be incurred to repair the damage to the building caused by Hurricane Ike. On Sept. 13, as the repositioning of the property was nearing completion and leasing activity was gaining momentum, Hurricane Ike made a direct hit on Houston's core business areas inside the 610 Loop, causing significant property damage.
The property sustained significant water damage primarily from approximately 50 shattered windows, roof damage, and leaking windows. Initial estimates of the cost to fully restore the property to its pre-hurricane condition are in the range from $2 $3 million.
The local impact from Hurricane Ike, combined with turmoil in the global financial markets and a recent drop in oil prices burdening the oil and gas industry, a significant driver of the Houston economy, could prolong the time it takes to re-lease the property, the company said.
The company added that it might have to obtain a revolving line of credit to fund any such shortfall in cash in the repair and leasing effort.
Read Watch List First
The Watch List is a powerful one-two-combination of both top-down macro analysis and bottom up micro real estate news, as well as valuable leads about companies expanding and contracting and property and loan investment opportunities. It is available for free by e-mail, which is the quickest way to review all of the news in the column as soon as it is published and link directly to the news and features you want. Just e-mail me your name, title, company, company business, city, state, and e-mail address. You can reach me by clicking on the byline above or e-mailing me at Mark Heschmeyer
Property Watch List
| Property | Property Type | CMBS | Special Servicer | Notes | | Town & Country Business Park, 3990-4052 E. Bijou St., Colorado Springs, CO | Office, 79,291 square feet | PNC 1999-CM1 | Midland Loan Services | The two-building property is real estate owned (REO). Midland continues to market the property for lease and/or sale through Sierra Commercial Real Estate. The property is 10% occupied (about 8,050 square feet). The larger building 60,000 square feet rema | | 601 Bangs Ave LLC, 601 Bangs Ave., Asbury Park, NJ | Office, 55,400 square feet | Grand Pacific BLT 2005-1 | Wells Fargo Bank | The special servicer was waiting a New Jersey court's final judgment of auction. | | 185 Commerce Drive, 185 Commerce Drive, Upper Dublin Township, PA | Office, 42,869 square feet | PNC 1999-CM1 | Midland Loan Services | The loan is paid through July 1 and was transferred due to a request from the borrower for temporary debt service deferral. The borrower requested deferment of up to three monthly mortgage payments, as the property is presently 50% occupied. The borrower | | Commons On Sanger Apartments, 5000 Sanger Ave., Waco, TX | Multifamily, 327 units | PNC 1999-CM1 | Midland Loan Services | Tarantio Property Management took over management of the property on behalf of the special servicer in May. Fire damage repair was to be completed last month. Leasing activity has been very strong with 48 new leases since Tarantino took over and non-payin | | The Marina Palms Apartments, 6904 Manatee Ave. West, Bradenton, FL | Multifamily, 299 units | Sovereign 2007-C1 | Sovereign Bank | The loan was 30 to 59 days delinquent as of Oc. 22. | | The Vogue Apartments, 3585 Central Ave., Fort Myers, FL | Multifamily, 84 units | Sovereign 2007-C1 | Sovereign Bank | The property is real estate owned (REO). The special servicer executed a listing agreement with Colliers Arnold Commercial Real Estate Services to market the property. The property requires substantial renovations, and the special servicer expects to sell | | Pro-Met Inc., 950 Bridgeview St. N, Saginaw, MI | Industrial, 92,000 square feet | PNC 1999-CM1 | Midland Loan Services | The loan transferred to special servicing in September. The tenant, which occupied the entire building, ceased making rent payments that month. The Saginaw industrial market, like much of Michigan, is soft due to the downtrend in U.S. auto manufacturing. | | Hermanos De La Torre Inc., 2000 Pomona Blvd., Pomona, CA | Industrial, 80,665 square feet | Grand Pacific BLT 2005-1 | Wells Fargo Bank | The loan is three payments behind. The collection department is working with borrower to bring account current. | | Jan & Johnny Inc., 2820 N. Hollywood Way, Burbank, CA | Industrial, 22,777 square feet | Grand Pacific BLT 2005-1 | Wells Fargo Bank | The borrower has filed Chapter 11. | | Chu-Fuan Liu, 375 Adrian Road, Millbrae, CA | Industrial, 10,732 square feet | Grand Pacific BLT 2005-1 | Wells Fargo Bank | The loan is three payments behind. The collection department is working with borrower to bring account current. | | Concord Hotel Ventures Corp., 5370 Clayton Road, Concord, CA | Hotel, 11,304 square feet | Grand Pacific BLT 2005-1 | Wells Fargo Bank | Only partial of September loan payment was received. | | High Point Golf Club LLC and Lakeview at Hight Point LLC, 201-203 Old Chimney Ridge Road, Montague, NJ | Other, n/a | Grand Pacific BLT 2005-1 | Wells Fargo Bank | Foreclosure is in process. |
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Editor's Note: Loans of Concerns
We've added a new feature to Watch List this week:
Watch List: Loans of Concern. Readers have been asking for some time for information on properties experiencing operational issues but that have not gone into special servicing. That's what we give you with Loans of Concern. This week's issue, includes properties in: Los Angeles and West Covina, CA; Washington, DC; Riverdale, MD; Rosedale, MN; Raleigh, NC; and Brownsville, TX.
The properties identified on this list have not gone into special servicing and are not delinquent or in default in their loan repayments. However, they have been identified in the past week by various bond rating agencies as loans of concern within a CMBS portfolio. We identify the properties and give you the rating agency comments on these properties.
There is one catch. You can only this get this report (and all of the stories included in this column, too) by downloading the file in Adobe pdf format.
You can download the file here. With the pdf version, you also get news of an upcoming property auction in Alma, MI, being offered by Williams Auctions.
CoStar Columns
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