Post-Recession First Sees $47M CMBS Loan

MIAMI—Netpark, a 1 million-square-foot office center in Tampa, is making post-recession history, of sorts, by scoring a $47 million non-recourse financing from a CMBS lender. It's the largest new post-recession loan for a property with Tenant in Common (TIC) ownership in the books.

Bluett & Associates arranged the loan and will also handle asset and property management, leasing and construction management for Netpark. According to Bluett's research, loans on TIC-owned properties account for much of the wave of $350 billion in commercial mortgage backed securities (CMBS) debt incurred before 2008 and maturing now through 2017.

When property values dropped, most lenders stopped refinancing TIC loans. That's because the complex underwriting can demand re-qualifying dozens of individual investors.

“The CMBS market is making an aggressive comeback, and non-recourse loans are again becoming available, even on complex deals,” says Lori Bluett, principal with Bluett. “Lenders are taking a fresh look at distressed TIC loans on quality properties that have strong equity.”

As Bluett sees it, Netpark's new loan spotlights the complexity of TIC refinancing—and a clear path to help owners and lenders streamline the process. Netpark is 85% leased to tenants such as Humana Medical Plan, Sodexo, Corinthian Colleges and the School Board of Hillsborough County.

“Netpark's refinancing is a welcome signal for thousands of retirees and other individuals nationwide who face the loss of tax advantages or losing their entire investment if maturing TIC loans are not refinanced,” Bluett says. “Owners of some foreclosed TIC properties find they're responsible for taxes on 'phantom income' that they've never received.”

Despite strong equity, excellent credit and a reasonable 65% loan-to-value refinancing goal, Netpark's owners faced financial crisis this spring. The former lender had decided not to renew TIC loans of this size, and the loan was maturing in 60 days. Under Netpark's former operator Daymark Realty Advisors, Bluett says the building was headed for foreclosure.

With the clock ticking and a 60-day deadline, Bluett link the owners with a New York-based CMBS lender. Based on Netpark's financial outlook, Bluett negotiated a 10-year, non-recourse loan while keeping the TIC structure in place to avoid additional costs of a roll up and/or dilution of interests.

Every Netpark investor had to agree to the loan to comply with tax codes, and the Bluett team handled the time-intensive contacts. Requalifying Netpark's 34 tenants in common meant contacting a total of 130 investors.

“With billions of dollars in TIC loans maturing throughout US markets in the next three years, it's crucial for TIC investors to come together,” says Bluett. “Typically the owners do not know of each other, although decisions about the properties require all owners to agree. They rely on a third-party operator to manage the asset, but in many cases, operator agreements incentivize selling a property at loan maturity, even if it's overleveraged.”