ORLANDO-New Boston Fund Inc. has acquired a controlling interest in Maitland Green I & II, two adjacent office buildings totaling 194,700 square feet, by paying off an existing $20-million loan at a discounted rate.
The Boston-based private equity firm declined to disclose financial details of the transaction, but state records show New Boston paid $10.5 million to Principal Financial Group to take out the first mortgage on the buildings. The note was held by Stiles, a Fort Lauderdale, FL-based commercial real estate firm, which purchased the properties in 2006 for more than $30 million as part of a joint venture with Chicago-based Capri Capital Partners.
“We're working with borrowers to come up with a plan to resurrect the value of the asset,” says Pryse Elam, southeast regional director for New Boston Fund. “Lenders are looking for solutions when buildings need new tenants, and neither the borrower nor the lender wants to fund the leasing costs. To prevent further deterioration of the collateral, the lending community is willing to consider a reasonable plan including discounted note payoff.”
Stiles will retain a small ownership interest in the Maitland Green properties through the recapitalization with New Boston. Although Stiles will continue to manage the property, the private equity firm will fund the project’s leasing and operating costs moving forward.
“The recent drop in occupancy and value at the building made it unattractive for the existing partnership and its lender to fund the capital necessary to re-stabilize the building,” Elam says. “Our willingness to provide new equity allowed the partner to negotiate a discounted payoff of the loan while remaining a partner in the deal.”
Located on Interstate 4, Orlando’s central north-south artery, the Maitland Green portfolio is currently 40% leased. Last month, it lost its lead tenant, FIS Financial Services, but managed to sign a renewal and expansion with the University of Phoenix in Maitland Green II.
These two properties have high quality finishes in common areas and attractive amenities including: marbled lobby, full-service cafe, state-of-the-art energy management system, security card access and on-site property management.
Elam tells GlobeSt. that New Boston and Stiles will work to increase the buildings’ occupancy, along with CBRE, which serves as the third-party leasing agent. “These buildings are 40% leased in an 85% leased market,” he points out. “Our focus going forward will be to bring the buildings up to market occupancy, if not better. Over some period of time, we will refinance them, and then probably within a five-to 10-year horizon, we’ll probably sell them.”
The Maitland Green investment represents the second deal that New Boston has completed with Stiles in the past 90 days. It recently completed a similar deal with Stiles on the Southpoint Executive Center, a 137,000-square-foot, class A office building in Orlando. The private equity firm acquired a controlling interest in the property in May 2010. The building is 30% leased including a recent 10,000-square-foot lease by Taylor Morrison Home Funding.
New Boston also owns AtlanTech Tower, a 12-story, class A building with a single-story annex totaling 413,390 square feet of office space that can accommodate tenants of up to 33,000 square feet on a single floor. Acquired by New Boston in December 2007, the property houses AT&T, CompHealth Group, Whole Foods Market and Alere.
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