An affiliate of Newport Beach-based KBS Realty Advisors has turned over a big industrial portfolio it bought near the peak of the market to its lenders, while other funds the real estate investment company oversees continue to snap up properties.
The company’s KBS Real Estate Investment Trust Inc. said in late December it had agreed to turn over a 24-property portfolio of warehouses and other industrial properties to its mezzanine lender, Los Angeles-based Oaktree Capital Management, in a deed-in-lieu of foreclosure.
The properties, spread across seven states, totaled about 11.4 million square feet. They were bought in a partnership with New Leaf Industrial Partners Fund of Los Angeles in mid-2007 for $516 million, with KBS REIT having an 80% stake in the investment.
The deal was funded with a $300 million mortgage and $144 million of mezzanine debt.
KBS REIT, a non-traded real estate investment trust that’s raised close to $2 billion from investors, said a decline in rents and rise in occupancy rates in the buildings made it unable to refinance the portfolio.
The deed-in-lieu should result in a gain on the extinguishment of debt of $108 million, according to KBS REIT filings with the Securities and Exchange Commission.
KBS still has an option to buy up to a 15% stake in the new ownership structure of the properties for $20 million as part of the deal with its lenders. It also will continue to keep managing the properties.
Despite the give-back by KBS—one of the country’s most active buyers of commercial properties the past few years—two other non-traded REITs the company runs continue to buy land and other properties.
In Nevada the company’s KBS Strategic Opportunity REIT was part of a venture that paid $21 million for 1,375 acres of land in North Las Vegas called Park Highlands, where more than 7,000 homes have been proposed.
The land was bought out of bankruptcy, with KBS taking a 50.1% stake in the new ownership team.
Also, KBS Legacy Partners Apartment REIT Inc. said in December it entered into a deal to buy a 196-unit apartment complex in the Chicago suburbs for $27.2 million.
The Schaumburg, Ill., complex, called Poplar Creek, was built in 1986 and is currently 96% leased.
Ontario Flip
Aliso Viejo-based CT Realty Investors Inc. was part of a venture that made a tidy profit on an Ontario industrial building it owned for a little more than a year.
CT Realty Investors partnered with a unit of Addison, Texas-based Behringer Harvard in late 2010 to buy the Archibald Business Center, a 231,000-square-foot distribution center on South Archibald Avenue in Ontario, Calif. That purchase—from Irvine-based Bixby Land Co.—was for a reported $9.5 million. At the time, the building’s occupant, Skechers USA Inc., was planning to vacate the building and move to a new facility in Moreno Valley.
The building now has a new occupant: Beauty 21 Cosmetics Inc., which just bought the building from CT Realty and Behringer Harvard for $15 million.
The industrial building, which is about 5 miles from Ontario International Airport, will be used as the cosmetics company’s new corporate headquarters and primary regional distribution facility. Beauty 21 had been based in Rancho Cucamonga.
CT Realty and Behringer Harvard also were partners in a similar, but larger, industrial flip last year, for a 1.4-million-square-foot project in San Bernardino last year now called the Inland Empire Distribution Center
CT Realty and Behringer Harvard, along with two other partners, bought the two-building property in late 2010 for nearly $50 million, leased it to Hewlett-Packard Co., and sold it last year to Atlanta-based Invesco Real Estate for close to $100 million.
CT Realty, which last month saw the death of cofounder and chairman Bob Campbell, is still eyeing more acquisition opportunities in the region, according to company officials.
“The Inland Empire continues to offer outstanding value-added opportunities which are well-suited to our team,” said James “Watty” Watson, CT Realty’s president and chief executive. “We are actively seeking additional high-quality investments in that area.”
Subcontractor BK
Newport Beach-based Walldesign Inc., one of the area’s larger residential subcontractors, filed for Chapter 11 bankruptcy protection earlier this month.
The company, which provides insulation, painting and other contracting services for area homebuilders, listed assets and liabilities of between $10 million and $50 million in its filing, made in Santa Ana’s federal court.
Walldesign’s chief executive is Michael Bello, who has also made a name for himself as a winemaker in Napa Valley and by owning thoroughbreds.
