Breakwater Equity Helps Investors File Bankruptcy to Shelter Office Building Damaged by Hurricane Ike

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Commercial Loan Workout Firm Seeks to Restructure Houston Investment Property

Breakwater Equity

We respect lenders who understand markets and have a realistic plan to recoup capital for their shareholders and bondholders. - Phil Jemmett, CEO, Breakwater Equity

Breakwater Equity Partners, a commercial loan workout and investment company, has filed bankruptcy on an office building located at 2656 South Loop Rd West in Houston, Texas in order to stop a foreclosure sale scheduled for September 4, 2012. The building was severely damaged from Hurricane Ike and the owners are restructuring the property to preserve their remaining equity and repair the portion of the 108,129-square-foot office building that is currently uninhabitable.

The investors purchased the six-story office building in July 2007 for $8.55 MM as part of a four-building campus. It was producing steady cash flows and had a stable mix of tenants. Hurricane Ike then pummeled the Houston area in September 2008 and severely damaged the building. The hurricane lifted off a portion of the roof allowing a torrential downpour to saturate the interior surfaces of all six floors. The building was immediately evacuated and declared unsafe for occupancy after the disaster. After a lengthy dispute with Allied Property and Casualty Insurance Company, AMCO Insurance Company and Nationwide Mutual Insurance Company, the owners settled their insurance claims for $4.70 MM in February 2009. Most of the settlement proceeds were used to repair a portion of the damage, including mold remediation.

The owners renovated the first suite of 10,432 square feet and the largest tenant, the Texas Comptroller, moved back into the building the very next month, March 2009. Since 2009, the owners used the insurance proceeds and rental revenue to restore the building. However, there were difficulties during construction which spawned litigation and drained cash from the property. Despite the difficult economic conditions, the owners were able to increase occupancy to 63% before running out of capital. Breakwater Equity Partners is proposing to infuse new capital into the building as part of the bankruptcy reorganization.

“Most CMBS special servicers pursue strategies designed to increase their fees at the expense of bondholders,” said said Phil Jemmett, CEO of Breakwater Equity.“In this case the special servicer, Situs, has a strong grasp of the building economics and is going the extra mile to recoup 100% of the loan for the benefit of its bondholders.We respect lenders who understand markets and have a realistic plan to recoup capital for their shareholders and bondholders.”

“Breakwater believes that this building can recover and is willing to invest new equity capital to complete the 35,000 square foot build-out and leasing of the property,” said Armand Nicholi, CFO of Breakwater Equity. “Houston is one of the strongest markets in the country and we expect this building to perform strongly in the coming years. We will do everything possible to help the current owners rescue their investment, while working with the lender to ensure a full recovery for the CMBS bondholders.”

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.

For more information please call 858-490-3630 or visit http://www.breakwaterequity.com.

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Danielle Gano
Elle Communications
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