Owners need not fear: Investors to the rescue

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As the distressed commercial property drumbeat escalates, companies like Griffis Blessing G.B. Value Partners and A10 Capital have entered the local market.

The Front Range — including Colorado Springs — is clearly in play.

Alan Welty, A10 Capital’s Denver-based executive vice president, said he’s looking for owner/users, commercial brokers or banks in need of a $500,000 to $10 million cash infusion to cover default shortfalls or equity requirements.

The company also will provide $250,000 to $3 million in first mortgage lending or in equity/mezzanine financing to building owners, brokers or developers — if the real estate meets its specifications.

A10 Capital’s business focuses on four areas:

First mortgages.

Equity investment and mezzanine loans which are higher risk but come in handy if a refinancing owner must cover a loan-to-value cash crunch, or if a community bank must make up for a portfolio loaded with too many defaulted properties.

Bank and tenant-in-common “solutions,” which might include managing or assessing a bank-owned real estate portfolio.

Helping the tenants-in-common work through cases of distressed properties financed through the now non-existent commercial mortgage backed securities market.

“We formed about two years ago, amassing about $200 million in investment cash,” Dunn said. “Then Lehman Brothers (went out of business) last fall. They left a huge hole in the market.  That’s when we decided to begin lending.”

Griffis Blessing and Denver-based Griffis Group also have shifted their investment strategy focus to the acquisition of “intrinsically strong” distressed properties, said Steve Engel, president of Griffis Blessing Investment Group.

“Our Fund II is active, and we’re doing similar investing, but strictly along the Front Range,” he said, adding that because Colorado hasn’t suffered the same recessionary hit as other parts of the country, good investment opportunities are limited.

He also admits that there’s no strict formula for identifying the fund’s best investment properties.

“Because we’ve got lots of cash and the ability to structure our debt or equity lending to meet specific needs of the owner, our goal is not just to find properties, but to fund those we think have the best chance for success,” he said. “That’s a win for both our investors and for an owner or bank. And if we end up with an asset, that’s good, too. But I think it will be 2010 before the real opportunities emerge.”

Some caveats

Olive Real Estate broker Stan Kensinger agrees that the distressed commercial real estate market offers plenty of opportunities for those with cash.

As a building owner, he said he and his partners have been lucky.

“We did some office development a few years ago that has solid financing — and it doesn’t require a re-fi,” he said. “But you’re going to see a lot of properties that do.”

Kensinger said that potential commercial borrowers should be careful, though.

“I’ve seen situations where a so-called lender requires an owner to come up with $1 million, and once it’s paid, they disappear,” he said. “You have to verify that a company is credible and actually has the capital.  And if they’re real and can loan money, how much ownership do they want?

“Banks just aren’t making loans right now because of increased restrictions.  So if someone is lending, you have to ask why — be a little wary.”

That said, Kensinger plans to keep his eye out for good investments.

“Everyone’s looking for those,” he said.