Breakwater Recapitalizes 177,000 SF Tenant-in-Common Building

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$13.0MM CMBS Loan Secured for Duluth, GA Office Property

"We knew that Breakwater had the expertise to handle our unique problem."

Breakwater Equity Partners, an investment and restructuring firm, has successfully recapitalized the tenant-in-common (TIC) investor owned property known as the Satellite Office Portfolio. Breakwater brought in new management, secured a $13.0 million replacement loan with an interest rate of 4.64%, a 30 year amortization and a 10 year maturity, and rolled the TIC investors into an LLC via an I.R.C. 721 tax deferred exchange. The restructuring was completed in six months.

The individual TIC investors purchased 1100 & 2000 Satellite in 2005 for $18.3 million. The property had leasing challenges and an impending loan maturity. Facing the potential loss of their investment, the owners hired Breakwater to bring in new management, find replacement capital for investors who wished to exit their investment, manage litigation, and obtain new financing.

“We have worked with Breakwater on several of our tenant-in-common investments,” said Penny Triezenberg, a Steering Committee Member for the Satellite Office Portfolio. “So we knew that Breakwater had the expertise to handle our unique problem, and we knew that they would aggressively negotiate the best deal for us. We are very pleased that the Breakwater team was able to find a sustainable solution to turn this property back into a profitable investment for us and our families.”

As part of the restructuring, Breakwater gave the owners the opportunity to exit the investment. Each owner had the option to sell his or her interest, based on a third party appraisal. In this particular instance, one hundred percent of the owners chose to retain their ownership in the property and continue receiving distributions and deferring their taxes. In other TIC deals, Breakwater has used this approach to break up the log jam many TIC groups face when some of the investors want to stay in the deal, and some of the investors want to sell.

“We were able to restructure this property and increase dividends by 50% because the Satellite owners were united and tenacious,” said Jack Rose, Chief Strategist at Breakwater. “The Breakwater team worked hard to understand the specific challenges to this investment, and then created several viable restructuring alternatives for the owners. After consultation with the owners, we implemented the best strategy and offered multiple options to the TIC investors. This enabled the investors to individually select the option that best fit their individual financial goal. We are delighted to deliver a profitable, revitalized investment to these investors. They have been through some very difficult times, and deserve to get a decent return on their investment capital.”

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Derek Uldricks

Derek Uldricks
Breakwater Equity Partners
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