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Monday, 20 October 2014

LNR Accused of Obstructing Borrower's Access to Loan Reserves

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Commercial Real Estate Direct Staff Report

The owner of the Creekside mixed-use property in the Columbus, Ohio, area has sued LNR Partners, alleging that the Miami special servicer obstructed its access to a reserve fund.

The fund is tied to a $25.1 million loan that's securitized through COMM, 2014-UBS2. The loan was transferred to special servicing last month, just six months after it was securitized and 11 months after it was originated, because it had defaulted.

The property's owner, a venture led by Strathmore Development Co. of East Lansing, Mich., claims that it had met all the requirements spelled out in its loan agreement to access the $375,000 it had deposited in a so-called achievement reserve account.

Access to the account is dependent on the property's 84-unit apartment component achieving a 95 percent occupancy rate. In addition, the loan had to have a 1.3x debt-service coverage ratio for two straight quarters and a debt-yield over the previous 12 months of at least 9 percent. Strathmore, in its suit, which was filed in U.S. District Court in Columbus, claims it met all the conditions and should have been given access to the funds in reserve.

In addition to the apartment units, the property, at 101-151 Mill St. in Gahanna, Ohio, includes 97,361 square feet of office and retail space, a performance stage and public plaza. It was valued at $33.3 million when its loan was written by UBS early this year.

The CMBS deal's trustee had assigned the authority to release funds from the reserve to LNR. Strathmore, in its suit, claims its loan agreement doesn't give LNR that responsibility.

The Strathmore group said in its suit that it had stopped making payments against the loan because of LNR's refusal to release the funds. That prompted the loan's transfer to LNR, which has initiated foreclosure.

The group further alleged that LNR has repeatedly asked for documentation that is not called for in its loan agreement. It did not spell out what type of documentation LNR has sought, but called the requests a "sham" and a "delay tactic."

"LNR, whose approval is not even required under terms of the loan agreement, has engaged in a pattern of improper and unnecessary requests for information with no apparent intention of ever acting upon the borrower's request," the group said in its complaint.

LNR declined to comment on the suit and the allegations.

Creekside, which is 95 percent occupied, generated $1.3 million of net cash flow in the first half. That was 50 percent more than the amount required to service the CMBS debt, according to servicer data compiled by Trepp LLC.

The Strathmore group acquired the property in 2012 after it had been abandoned by a developer that only partially had completed the project.

Comments? E-mail John Covaleski or call him at (267) 247-0112, Ext. 208.



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Additional Info

  • Syndicate to Realpoint: No
  • States: Ohio
  • Sector: Mixed-Use
  • Subject: Legal Issues (LEGL)
  • Deal Name: COMM, 2014-UBS2
  • Company: LTC Properties Inc.
  • Private: No
  • bloombergDealName: COMM 2014-UBS2
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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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