RESIDENTIAL
It’s been a tough few weeks for Bethany Group LLC, an Irvine-based apartment owner that counts some 15,000 units across the country but whose future now largely appears to be in the hands of the courts.
Earlier this month, reports began surfacing in Arizona, Maryland and Florida about problems at Bethany Group’s complexes: employees not being paid for weeks, accumulating trash, utilities being shut off and tenant confusion over their living situations.
Much of the biggest reported problems were coming out of Arizona, where Bethany Group paid big to get into the market in mid-2007.
In June 2007, the company snapped up 12 complexes and more than 5,000 apartments for a reported $428 million. The deal, made near the peak of the commercial real estate market, was said to be the largest apartment acquisition in Arizona history. Lehman Brothers Holdings Inc. financed the deal.
The seller of the Arizona portfolio was another Orange County apartment investor, Irvine-based Bascom Group.
That deal capped a rapid run of deals across the country for Bethany Group, which prior to the Arizona acquisition counted a portfolio valued at more than $600 million, according to filings with the Securities and Exchange Commission.
Many of those properties now are tied up in bankruptcy court. Three portfolios of apartments in Texas and Maryland, tied to secured debt of about $400 million, filed for Chapter 11 protection earlier this month.
The Arizona portfolio to date has not filed for bankruptcy, although local reports say the properties have gone into receivership.
Bethany Group never defaulted on any of its payments to its lenders, said Evan Smiley, a partner with Costa Mesa’s Weiland, Golden, Smiley, Wang, Ekvall & Strok LLP, which is representing the company.
Instead, big investors including Lehman declared that Bethany Group’s covenants were in default and began directly taking all the company’s funds, leaving no money to pay workers and vendors, Smiley said.
The bankruptcy filings will allow Bethany to use its money to pay expenses, he said.
Robert Mosier, of Costa Mesa-based turnaround management company Mosier & Co., is expected to be named a court-appointed receiver for the bankrupt entities.
Bethany wasn’t the only apartment investor to have gambled on a big buy at what turned out to be the peak of the market. A month before its deal in Arizona, Tishman Speyer Properties LP and Lehman Brothers announced plans to buy apartment developer Archstone-Smith Trust for $13.5 billion.
The Archstone purchase, along with Lehman’s deals with Irvine-based master developer SunCal Cos., were Lehman’s most-criticized commercial real estate deals prior to its own bankruptcy last September.
San Diego Move
Irvine-based Whittlesey Doyle, a land brokerage and advisory firm that’s done most of its business in Riverside and San Bernardino Counties, said it is aiming for more business in San Diego.
The company added Steve Relth as a senior broker to focus on the marketing of residential land and development opportunities for sale in San Diego. Relth most recently was a broker sales associate at Coldwell Banker.
Clarification
Last week, I wrote about Irvine-based brokerage Park Place Partners Inc. combining with Arizona’s Land Advisors Organization of Scottsdale. The two have joined operations but have yet to sort out exact ownership details of the combined company, according to Park Place President Tom Reimers. That’s set to happen in coming months, he said.
COMMERCIAL
Newport Beach-based Core Realty Holdings LLC said Russ Colvin, its chief executive and cofounder, is stepping back from day-to-day operations of the real estate investor.
Colvin was named chairman emeritus and is to relinquish his positions as Core’s president and chief executive.
His old responsibilities are being assigned to current management for the foreseeable future, the company said.
It counts a portfolio valued at more than $1.2 billion.
