Commercial Real Estate Direct Staff Report

Thomas Properties Group is selling 22 million common shares, plus up to another 3.3 million shares to cover over-allotments, through joint bookrunners UBS Investment Bank and Wells Fargo Securities.

The Los Angeles office REIT said it would use proceeds of the offering to repay property-level debt and for general corporate purposes, including paying down debt as required under certain refinancings and extensions. It might also seek to acquire debt on an opportunistic basis.

Robert W. Baird & Co. and FBR Capital Markets are co-managers for the offering.

Thomas Properties owns stakes in 27 properties with 13.2 million square feet. It carries $765.3 million of debt, with $311.2 million of that coming due next year, as of the end of September.

But it has already aggressively addressed some of those maturities. For instance, last month it structured the discounted pay off of $36.1 million of mezzanine debt on Two Commerce Square, a 953,276-sf office building in downtown Philadelphia. It agreed to pay $25 million to wipe out the debt, which is comprised of a $31.6 million senior mezzanine loan that carried an effective rate of 19.3 percent and a $4.6 million junior mezzanine loan with a rate of 15 percent.

Those loans, which had a balance of $76.5 million when they were originated in 2004, are subordinate to $108.2 million of senior mortgage debt that carries a rate of 6.3 percent and matures in 2013. That debt was split in two and securitized through Bear Stearns Commercial Mortgage Securities Trust, 2004-PWR3, and Morgan Stanley Capital I Trust, 2003-IQ5.

The mezzanine debt had been held by DB Realty Mezzanine Fund II.

Thomas Properties has struck agreements to modify two other loans that are held by lender Wells Fargo Bank: a $17 million construction loan on Campus El Segundo, a proposed 1.8 million-sf mixed-use complex in El Segundo, Calif., and a $40.5 million construction loan on Four Points Centre, a proposed 1.7 million-sf mixed-use project in Austin, Texas.

The El Segundo loan was to mature this month, but had a one-year extension option. Its initial maturity has been extended to July 31, 2011, and could be extended for up to three additional years. Thomas has to make a $2.5 million payment for each annual extension. The loan has a rate of Libor plus 375 basis points.

The Four Points loan, against which $29.7 million has already been drawn, was extended two years to 2012 from its June 2010 maturity. It can be extended for two additional years.

Thomas has agreed to pay the loan's balance down by $7.8 million. Its rate is Libor plus 350 bp.

Comments? E-mail Orest Mandzy or call him at (215) 504-2860, Ext. 211.