Union Pines Investors Partner with Breakwater Equity Partners to Refinance and Restructure Tenant-in-Common Property

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Loan restructure expected to increase dividends by about 700 percent for 22 investors.

Breakwater Equity

“The reduction in distributions has caused problems for many of us. Many of our investors are retirees and were counting on the distributions to supplement a fixed income." - Corky Bless, member of the Union Pines steering committee.

Breakwater Equity Partners, a real estate consultancy and investment firm, has reached an agreement with the 22 tenant-in-common owners of Union Pines, a 134,298 SF office building in Tulsa, Oklahoma. The owners brought in Breakwater to address two immediate challenges. The mortgage debt on the property is scheduled to mature later this year, and the primary tenant’s lease will expire this fall.

The owners purchased the property in November 2003. The building was 100 percent leased at the time of purchase, with US Cellular as the primary tenant. Most of the tenant-in-common owners purchased their interests through 1031 tax-deferred exchanges. The property steadily produced dividends until 2009, when they were sharply reduced and then halted.

“The reduction in distributions has caused problems for many of us,” said Corky Bless, a member of the Union Pines steering committee. “Many of our investors are retirees and were counting on the distributions to supplement a fixed income. Although the property has equity, we thought that we would have to sell the building when the loan matured; that would have created negative tax consequences for many of the investors. Breakwater has agreed to buy out the investors who need to sell, while allowing the other investors to stay in the property and continue to maintain their tax deferral.”

While the property has equity, in order to get new financing the owners need to convert from a tenant-in-common structure into a single owner structure. This can be done on a tax deferred basis through Internal Revenue Code Section 721. In addition, the lender will require a loan guarantee from a responsible party. As part of the agreement with the Union Pines owners Breakwater will oversee the 721 “rollup” process and act as the loan guarantor.

“Tenant-in-common loan restructurings are very complex,” said Phil Jemmett, Breakwater CEO. “In this particular restructuring, a few of the owners need to sell, so we are buying them out at the current market value. For the remaining investors, we are going to bring in a new loan at a much lower interest rate and reduce the operating expenses. We expect to increase dividends by about 700 percent. We’re delighted for the opportunity to make Union Pines the best investment possible for its owners.”

“We know that Breakwater has successfully restructured tenant-in-common properties by negotiating lease extensions and bringing in new debt,” said Bless. “We’re very excited to have them on board and hope to refinance the loan soon so that distributions can resume.”

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 $3B, the firm has devised a unique, multidisciplinary approach to uncovering and resolving distressed assets. 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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