ROSEVILLE, CA–The $51 million recapitalization of Parkway Corporate Plaza, a 288,000-square-foot, institutional quality office park, has been completed. The office park, located at 1620-1680 E. Roseville Parkway, is one of many core assets purchased in the early 2000s under a tenants in common (TIC) structure. The property is currently 85% leased to mostly national tenants including Kaiser Permanente, Sutter Health, Wells Fargo, California Department of Social Services and Act-On.
During the recession, the property faced CMBS debt maturity. NNN Properties Inc. purchased the property in 2003 for $63.65 million and syndicated it to 27 TIC owners and a collective investment group as the 28th TIC member. After losing a lead tenant and changing operators, the TIC ownership group went into loan default when it could no longer advance funds for the asset's leasing needs. The special servicer filed for technical default foreclosure on the asset and lawsuits ensued.
Facing imminent foreclosure, the ownership group hired Bluett & Associates Inc. to oversee the recapitalization process. Bluett handled completing a loan payoff resolution, bringing in a new lender, navigating the bankruptcy default, resolving and terminating all lawsuits, repositioning the asset and rolling up the TIC entity into a new single-purpose entity controlled by the selected equity source.
Broe Real Estate Group was selected to provide $10 million in equity capital, a controlling interest in the property. The bulk of secured debt, $41 million, was secured with PCCP LLC, which was able to commit within 10 days and close within 30 days after that to effectuate the defaulted CMBS payoff. All lawsuits have now been settled and/or withdrawn, court cases were dismissed and the asset has transferred ownership.
Lori Bluett, principal with Bluett & Associates, tells Globest.com: "With 10 year loans coming due on many commercial assets purchased by TIC structures at the peak of 2005 and 2006, being able to find restructure opportunities and navigating the many complications of reforming TIC structures is paramount to some of California's key commercial assets. 2015/16 has 2,677 expiring CBMS loans in California with loan balances above $24BB. Many of these involve complicated TIC structures that are difficult to refinance and require new equity infusions and restructuring. Almost all of these TIC structures include senior citizens and other non-real estate-savvy investors who have invested their life savings. Without a strategy and people to approach these situations with a solution, not only will many real estate investors be faced with the loss of their investment, but it will also have an impact on California's recovering commercial real estate market. Most TIC assets are large, core assets that required TIC syndication due to the purchase price amount, and each one can affect the local real estate economy."
Parkway Corporate Plaza's ownership group chose Broe from among several national firms, based on Broe's ability to fund large amounts, appetite for complex and time-sensitive transactions, ability to partner well in the TIC space, and experience working with lenders of all types.
“We met Lori Bluett through a national lender that has used her team to handle complex situations,” said Jim Crawford, vice president of acquisitions at Broe Real Estate. “This was an intensive situation with many stakeholders and turbulent emotions.”
Jim Galovan with PCCP reinforced the urgency of the challenge. “It was a tall order, asking us to underwrite a loan of this size as a roll-up within two weeks. Based on our knowledge and market presence, and our relationships with Bluett and The Broe Group, we were able to underwrite and have this loan approved within 10 days of the ask.”
Bluett's Property Management arm, Juno Commercial Real Estate Inc., will stay on the asset as property manager, and Chris Lemmon, senior managing director of Newmark Cornish & Carey in Roseville, who consulted on this asset for Bluett, has been selected as the new landlord leasing representative.
“With a foreclosure looming and monumental issues at hand, we were able to not only save the asset, return it to its owners and new equity investors, but position it to thrive in the marketplace. Several owners of this asset invested their life savings in it and would have lost their investment and faced a taxable event with a foreclosure,” says Bluett.
As previously reported, another Roseville, CA property was sold last month.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
