PLEASANTON, CA—Three years ago, almost all of the tenant leases at the Britannia Business Center were scheduled to expire within 24 months and the loan was maturing at the same time. The tenant in common (TIC) investors did not have a business plan or enough equity in the property to refinance through conventional channels. To address the looming deadline, Clear Vista Management was hired to manage and restructure the investment, and Versant Commercial Brokerage Inc. stepped in to raise capital. That three year effort paid off, with the Britannia Business Center now successfully recapitalized.
"We appreciate the years of effort that Clear Vista and Versant put into saving this property," said Dale Shoup, investor steering committee member. "Without their vision and diligence the investors would have lost this property to foreclosure. We are happy to continue to own such a quality asset in one of the most dynamic markets in the country."
Versant Commercial Brokerage Inc. assisted the TIC investors by originating new debt financing, bringing in new equity to stabilize the property, purchasing the interests of those who needed to exit the investment and utilizing Internal Revenue code section 721 to roll up the structure into an LLC on a tax-deferred basis.
Quinn Palomino, principal at Clear Vista and Versant, tells GlobeSt.com: "Tenant in common properties are always challenging. Britannia was particularly difficult because of the almost 100% tenant rollover and the high level of debt. At one point the property was $20 million under water."
Clear Vista first focused on retaining existing tenants and reducing operating expenses by almost 20%, which increased the value of the property. With the assistance of the leasing brokers at Newmark Cornish & Carey, Clear Vista was able to retain a major tenant to bring occupancy up to 82%. The investors then looked to Versant to design a financial solution that preserved the tax deferral and provided an opportunity to recover a significant portion of their original investment.
Versant designed and completed a complex recapitalization with the assistance of Ethan Schelin of Landmark Capital Advisors. New senior debt and two separate classes of subordinated financing were originated, totaling $64 million. Versant designed the capital structure to maximize current equity and protect tax deferrals.
"This was a very difficult undertaking and our teams spent countless hours creating the best solution for the owners. We are delighted to save the property for the investors," says Palomino.
As previously reported, the 680 Corridor has plenty of vacant space.
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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.
