Deirdre Hamill/The Arizona Republic McCarthy Cook had been in default since late 2009 on a $65 million loan to fund buying the Viad center.
Owners of the Viad Corporate Center high-rise office tower in central Phoenix have managed to avoid foreclosure by bringing in a big-name investment partner to help restructure its commercial mortgage debt.Under the deal, Costa Mesa, Calif., real-estate investment firm McCarthy Cook & Co. will retain ownership of the 480,000-square-foot tower along with its new partner, New York-based investment firm Morgan Stanley.
The deal was structured as a purchase transaction, with the new buyers paying $56 million.
That's slightly more than half of the price McCarthy Cook agreed to pay when it originally acquired the property in 2006 for about $106 million.
Viad Corporate Center is the headquarters building of Viad Corp., a marketing, travel and recreation-services company, but the company is not involved in ownership of the building.
Viad at one time had been the building's biggest tenant but has reduced its floor space inside the tower to 25,000 square feet from 150,000 square feet.
Office-building owners in general have struggled for the past three years to hold on to tenants. The challenges of managing commercial real estate had been so daunting that many commercial-real-estate lenders had tried to prevent or delay having to foreclose whenever possible.
However, in the past six months, the flow of private investors' cash into the commercial-real-estate market has increased dramatically.
A number of lenders have begun to foreclose on commercial real estate, and many more investor-driven deals have caused properties to change hands.
The Viad Corporate Center loan was one that had been subsequently sliced up and mixed in with pieces of other commercial loans, then sold on the investment market in what are known as tranches - the French word for "slices." Such loans are known as commercial mortgage-backed securities.
Cassidy Turley Executive Vice President Eric Wichterman said he expects to see many more foreclosures, short sales and other deals close as the millions of dollars in securitized loans invested in Arizona real estate slide deeper into default.
Real-estate investment firm McCarthy Cook had been in default since December 2009 on a $65 million loan obtained to finance the Viad Corporate Center purchase in 2006.
The total debt had grown to more than $81 million by March 2010, according to Maricopa County Superior Court documents filed at that time by Bank of America, which had inherited the loan as part of its acquisition of Chicago-based LaSalle Bank Corp. in April 2007.
BofA had asked the court to appoint a receiver to manage the property because McCarthy Cook had stopped making payments on its loan.
The court appointed San Diego-based Trigild Corp. to act as receiver. BofA had requested Trigild because it specializes in distressed-property management, receivership and loan recovery.
Trigild subsequently listed the building for sale and hired commercial real-estate services firm Cassidy Turley BRE Commercial to act as broker.
Wichterman said Cassidy Turley had identified a buyer and was working to close the deal when the original owner moved to block the sale.
Although the courts have upheld the right of receivers to sell property out from under the existing owner, Wichterman said no title company had been willing to insure title on the deal because McCarthy Cook had threatened to sue.
"You can't get title insurance if the title company objects," he said.
The original ownership group led by McCarthy Cook was known as MCC/I&G Viad Office Tower Owner LLC.
The new partnership formed by McCarthy Cook and Morgan Stanley is MS MCC Viad LLC.
by J. Craig Anderson The Arizona Republic Jun. 2, 2011 12:00 AM
Phoenix high-rise deal averts foreclosure
Posts
