CHICAGO-The creditors of Rubicon US REIT, Starwood Capital Group, Kaufman Jacobs LLC and JPMorgan Chase & Co., have partnered to pull the locally-based trust out of bankruptcy. The trust’s holdings, mostly leased by government tenants, are valued at about $550 million.
Rubicon was a subsidiary of Australian-based Rubicon American Trust, which had filed bankruptcy in June 2009. The US trust also was forced into bankruptcy by its parent, but the creditors gathered together to arrange a reorganization.
Per terms of the reorganization, about $80 million in bonds were exchanged for 100% of the common stock of the US REIT and the issuance of new corporate debt of $50 million, which ensures adequate solvency, according to Jeremy Kaufman, CEO of Chicago-based Kaufman Jacobs. He says class A preferred stockholders will retain their equity through the bondholder’s plan, and unsecured creditors will be paid in full, about $1 million.
About 1.8 million square feet of the REIT’s holdings is with the GSA II portfolio, with the government agency, as well as state and municipalities, leasing at properties in nine states. Tenants include the FBI, US Secret Service and Department of Homeland Security. Other holdings include Overtown Transit Village Phase II, a development project in Miami, and three other joint ventures, all totaling about 1.5 million square feet.
Kaufman tells GlobeSt.com that the properties are performing much better than the trust was. “The company was just overleveraged. The cash flow was fine, they were meeting obligations. The problem was that they had $169 million of traunch debt, and though it was paid down to $81 million, that was still more than the equity left in the trust. The notes were coming due,” he says.
The name Rubicon will stay, Kaufman says. “The only thing that’s changed is now the creditors are the owners,” he says. His company will take day-to-day management of the trust.
Christopher Graham, managing director of the Greenwich, CT-based Starwood, said the partnership plans to increase the value and net operating income of the properties. “We plan a multi-year, targeted disposition strategy following our value-accretive efforts on behalf of our affiliated funds,” he said in a statement.
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