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SOURCE: Elle Communications
$22.35 Million Investment to be Reorganized in Bankruptcy
Houston, Texas (PRWEB) January 07, 2013
Breakwater Equity Partners, a commercial real estate restructuring and investment firm, has filed a Chapter 11 bankruptcy on two Houston buildings located at 9720 and 9730 Cypresswood Drive. The bankruptcy was filed in the Northern district of Illinois. The property, which includes an 82,821 square-foot, four-story class A office building and an 11,480 square-foot, stand-alone restaurant, will now be restructured through the bankruptcy process.
The 33 tenant-in-common investors purchased the two buildings in 2007 for $22.35 million. Many of the owners purchased the property through 1031 exchanges in order to defer taxes. Most of the tenant-in-common owners are mom-and-pop investors who were told that the investment was low risk and would produce steady monthly dividend distributions; some of the owners placed their entire life savings into the buildings in order to fund their retirement.
When the investors purchased the building in 2007 the deal sponsor, Grubb & Ellis, did not disclose that the submarket was substantially overbuilt with considerable new product in the pipeline. As a result of the overbuilding, vacancy rates skyrocketed. The property’s revenue was no longer sufficient to cover the monthly loan payments and the property value plummeted. The distributions to the owners decreased and then stopped altogether in early 2012.
“We would not have purchased this investment if we had been told about the overbuilding in the submarket,” said Bruno Vogele, one of the investors. “Most of us are senior citizens who are dependent on this investment for retirement income. We can’t afford to lose our life savings.”
“Cypresswood is a classic example of a troubled tenant-in-common property,” said Phil Jemmett, Breakwater CEO. “The owners, many of whom are elderly, are the victims of fraud and negligence.
This bankruptcy gives the owners an opportunity to restructure their asset under the supervision of a Federal bankruptcy judge. We are committed to giving these tenant-in-common investors a chance to save their investment.”
About Breakwater Equity Partners
Breakwater Equity Partners, a San Diego-based commercial real estate consultancy and investment firm, has extensive experience handling over 200 engagements with loan values in excess of a $3B. Breakwater has devised a unique, multidisciplinary approach to uncovering and resolving distressed assets. Breakwater’s professional team combines legal, financial, economic, banking, tax, and regulatory expertise to devise customized strategies for each property regardless of market (primary to tertiary), asset class (office, retail, multi-family, industrial, flex, land) or loan type (portfolio or CMBS). For more information on Breakwater Equity Partners, please call 858-490-3630 or visit http://www.breakwaterequity.com.
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