Investors Hire National Workout Firm, Breakwater Equity, to Restructure Met Center 1 and 2

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Bankruptcy Filed to Stop Foreclosure on TIC Property in Austin, TX.

Breakwater Equity

"It is a time consuming and expensive process to pursue wrongdoers, collect judgments, and then permanently fix structural issues."

Breakwater Equity Partners, a commercial loan workout firm, has been hired by nineteen tenant-in-common (TIC) investors to restructure Met Center 1and 2, located at 7901 E Riverside Drive in Austin, Texas. The investors recently filed a Chapter 11 bankruptcy in order to stop the imminent foreclosure of the building.

When the owners purchased the two-story office building in 2007 for $12.1 MM it was 100% leased and producing healthy dividend distributions to the owners. By 2011 occupancy dropped and the sponsor stopped paying dividend distributions. Refinancing became impossible after the owners discovered that expansive soils had caused the slab and flatwork to shift, creating millions of dollars in damages. The loan matured in November 2011 and the TIC investors were unable to pay off the $8.6MM balloon payment.

Due to the costs of remediating the building, Breakwater believes that the current value of the property is approximately $3.5MM, putting the property $5MM underwater. “We are in the process of completing a debt restructuring and remediation on Met Center 10, which is located just up the street from Met Center 1 & 2,” said Armand Nicholi, Chief Financial Officer for Breakwater. “As we have demonstrated on Met 10, it is a time consuming and expensive process to pursue wrongdoers, collect judgments, and then permanently fix structural issues.”

During the mid-2000s TIC investments were marketed to small investors as a strategy to defer income taxes through IRC 1031. Due to the real estate bubble, these investors had large sums of money to reinvest in real estate. Most of these investors were inexperienced and were looking for safe and steady retirement income. “Unfortunately, some of the sponsors did not disclose all of the risks associated with these investments and many mom-and-pop investors should not have been encouraged to plunge their life savings into these speculative ventures,” said Phil Jemmett, Breakwater CEO. “In addition, some of the properties were grossly mismanaged and most of the properties did not have a viable plan to refinance or restructure the debt when it came due. This is a recipe for disaster. Most of these investors cannot afford to lose their nest egg.”

After reviewing their options the owners decided to hire Breakwater to save their investment. “When the building went up for sale on auction.com, we knew that it was time for professional help,” explained Marilyn Broderson, a member of the Steering Committee. “Breakwater is the only company that has successfully restructured TIC-owned properties in bankruptcy. We filed bankruptcy to stop the foreclosure and can now focus our attention on pursuing the companies and individuals who created this nightmare.”

“We successfully restructured a TIC-owned property in this same business park -- Met Center 10. The owners are very happy to recover their entire investment,” said Jemmett. “Met Center 1 and 2 has many of the same potential defendants and we are confident that the courts will hold the wrongdoers responsible.” On behalf of the investors, Breakwater has hired Knisely, Prehoditch & Panzer, P.C., an Austin law firm, to review legal claims and pursue litigation.

About Breakwater Equity Partners

Breakwater Equity Partners is a San Diego-based commercial real estate workout consultancy and investment firm. Through Breakwater’s extensive experience on over 200 engagements with loan values in excess of a $2.5B, the firm has devised a unique, multidisciplinary approach to uncovering and resolving distressed asset situations. Breakwater’s professional team combines legal, financial, economic, banking, and real estate expertise to devise customized strategies for each case regardless of market (gateways to tertiary), asset class (single and multi-family, office, flex, multi-tenant land, time shares, development, power centers) or loan type (portfolio or CMBS). Please visit our website at http://www.breakwaterequity.com to review case studies on representative deals.
Breakwater Equity Partners, please call 858-490-3630 or visit http://www.breakwaterequity.com.

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Danielle Gano
Elle Communications
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