Distressed Asset Wins Investor Despite 48% Occupancy

PALM BEACH, FL—In one of the hairiest deals of the year, Capmark Bank has disposed of the Fountains at Camino, a mixed-use, class B office and retail property. Boca Medical Plaza LLC snapped up the seven-building property for $16 million.

Located at 7000–7700 West Camino Real in Boca Raton, the park totals 184,575 rentable square feet including two banks and multiple medical office users. The building was 48% occupied at closing.

Scott O'Donnell and Dominic Montazemi from CBRE's Private Capital Group were joined by Christian Lee and Charles Foschini from CBRE’s Institutional Group in representing the seller, CB Camino Real. CB Camino Real is limited liability corporation of Capmark Bank.

“This location is within a densely inhabited Orthodox Jewish area,” O’Donnell tells GlobeSt.com. “We were able to garner a great deal of interest from similar religious demographics in the investment community out of the northeast as well as locally. Boca Medical Plaza ended up becoming the most aggressive bidder for this asset, and ultimately the buyer.”

The original owner bought on the mixed-use property at $180 per square foot at the peak of the market, CBRE reports. At that time, the mixed-use property was 90% occupied. The occupancy had dipped to 70% by the time CBRE took it to market last fall.

During the course of the marketing, the buildings lost tenants because the lender did not make financial investments into the property. Nevertheless, CBRE received more than 20 offers, largely from Orthodox Jewish communities, including groups from New York and Israel.

“We dropped in occupancy down to 48% by the time it went under contract,” O’Donnell says. “The buyer was very concerned about its ability to lease space in this project. We had to show the buyers that the market was extremely strong and they could absorb the space at the projected rental rate within a very abbreviated time frame.”

The asset traded at a discount to replacement costs and a strong discount to pricing at the peak of the market when it last sold. Among the challenges: the original borrower had not closed out permits and the surrounding buildings have unconventional construction. One even looks like a space ship.

“There were over 100 open permits and violations that this buyer had to inherit the cost to close out and correct post-closing,” O’Donnell says. “There was a great deal of risk with what that actual cost would be. The buyer was able to get its arms around those risks.”