Industrial Sells for Maturing CMBS Loan Balance

SACRAMENTO-The private REIT Berkeley Capital Trust is planning to capitalize on the recession by purchasing properties for their CMBS loan balances that are coming due. Berkeley Capital’s acquisitions VP Ricki Heck tells GlobeSt.com it recently closed its first such deal at a 9.1% cap rate.

Simple math explains why Heck expects more of these types of opportunities. If you have a $10-million property and you put a 65%, five-year CMBS loan on it in 2005 and your value then dropped by 30% to $7 million due to the recession, you’re going to need to bring $3 million to the table next year in order to refinance because banks are now only lending on 50% of the value.

That, basically, is what happened to Business Property Trust of Portland, which recently sold Berkeley Capital Trust an 80%-leased, 153,000-square foot industrial development in the Rancho Cordova submarket here for the property’s CMBS loan balance of $6.63 million or $43.47 per square foot. The property was appraised at $9.81 million in 2004 but rents due to the recession have since fallen from the $0.80s and $0.90s per square foot per month to the $0.50s per square foot. The loan was coming due in January 2010.