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Tuesday, 11 October 2016

TIC Group Recapitalizing Conn. Office Property Facing Mortgage Maturity

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Commercial Real Estate Direct Staff Report

The tenant-in-common investor group that owns the Addison Corporate Center, a 585,222-square-foot office property in the Hartford, Conn., suburb of Windsor, Conn., is in the process of being recapitalized.

The 41-year-old property, at 175 Addison Road, was acquired by the group, then sponsored by Cabot Investments, in 2006 for $64.4 million. It had set aside $9.6 million for capital improvements and other costs. It had funded its purchase with a $53 million mortgage that had been securitized through Cobalt CMBS Commercial Mortgage Trust, 2006-C1. The loan had transferred to special servicing in 2012 when it defaulted. The TIC group subsequently sued Cabot, alleging the company misappropriated cash that the property had generated. It later fired the investment manager.

A year later, the loan was sold by special servicer CWCapital Asset Management for some $30.3 million. The buyer could not be identified. The loan's terms evidently were modified and it's remained current. But it matures early next month.

While the property, which is just less than 75 percent occupied, had been generating enough cash flow to keep the loan current, a number of leases were coming due. With a lack of capital to fund tenant improvements and pay leasing commissions, the TIC group early this year hired Virtua Partners, a Phoenix investment manager, to help it recapitalize the property and refinance the maturing loan. Virtua has helped other TIC groups resolve their problem loans. It's affiliated with Versant Commercial Brokerage of San Diego.

Virtua previously had handled the recapitalization of Britannia Business Center I, a 296,537-sf office property in Pleasanton, Calif., in a deal that involved the repayment of a $55.5 million loan securitized through Wachovia Bank Commercial Mortgage Trust, 2006-C23, and earlier this year, it recapitalized Met Center 15, a 257,600-sf office property in Austin, Texas. That deal involved the repayment of a $22 million CMBS loan that was securitized through GE Commercial Mortgage Corp., 2005-C4.

Virtua is expected to roll up the TIC into a limited-liability company or limited partnership and close on the new financing, allowing it to refinance the maturing loan. To that end, Versant has lined up $32 million of senior financing with a three-year term, and is in the process of raising $10 million of preferred equity and $7.5 million of common equity. A total of $2 million of the preferred is being raised through Crowdstreet, a crowdfunding platform.

A total of $40.6 million of the proceeds will go toward paying off the existing loan, with the bulk of the remainder going to fund tenant improvements, other capital improvements and leasing commissions. Already, Versant has signed on Triumph Group to 88,255 sf at the property, while existing tenant Belcan Engineering Group has increased its footprint in the building by 9,507 sf, to nearly 65,500 sf and extended its lease by five additional years to 2022. Both deals have brought the property's occupancy to 90 percent. Other tenants at the property include GE's Alstom unit, which occupies 216,152 sf under a lease that runs through April 2020, and Sun Life Financial, which occupies 100,623 sf through 2021.

The property currently generates roughly $5 million of net operating income, which is roughly in line with NOI in 2006 when its CMBS loan was originated. But that's expected to increase as the Triumph and Belcan leases go into effect.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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Additional Info

  • Syndicate to Realpoint: No
  • Cities: Hartford
  • States: Connecticut
  • Sector: Office
  • Subject: Mortgages/Financing (MOR), Tenant-in-common Investors (TIC)
  • Deal Name: Cobalt CMBS Commercial Mortgage Trust, 2006-C1, GE Commercial Mortgage Corp., 2005-C4
  • Private: No
  • bloombergDealName: GECMC 2005-C4, CWCI 2006-C1
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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