Credit Tenants Go the Distance in The Woodlands
Regions Bank The plan includes developing a freestanding structure consisting of a Regions Bank branch.

HOUSTON—Dallas-based Mohr Capital has expanded its acquisition efforts in the Houston metro area by acquiring a property for retail redevelopment in The Woodlands. The redevelopment plan includes razing the 7 Leguas Restaurant building, and developing a freestanding structure consisting of a Chipotle Mexican Grill restaurant and a Regions Bank branch office.

Chipotle is a publicly traded restaurant operator with approximately 2,700 US locations. Regions Bank, headquartered in Birmingham, AL, has approximately $2 billion of assets, including more than 3,000 retail branches and standalone ATMs. Both concepts are corporately guaranteed and operated.

“We are pleased to be working with top-tier concepts and helping to facilitate their expansion,” said Rob Solls, director of retail investments and acquisitions for Mohr Capital. “This is a prime example of how Mohr Capital is continuing to target best-in-class fundamental real estate, where we believe there is an opportunity to extract value.”

Solls handled the transaction for Mohr Capital. He says it was a value-add opportunity for several reasons.

“This was a great local mom and pop concept, but we knew there was a void for multiple national credit retailers,” Solls tells “We also knew we would have an opportunity to redevelop the site into two pads, given the size. We were then able to maximize value creation for the site by laying out two smaller pads and securing two top-tier national retailers.”

He went on to say that The Woodlands is always a desirable location for credit tenants even though retail is uneven in many parts of the country.

“The Woodlands certainly is a highly sought after market, but when dealing with quality brands like Chipotle and Regions Bank, investors always have an interest in owning that type of credit,” Solls tells

Last year, Houston posted some of the strongest retail stats while other major markets have fallen prey to the retail apocalypse, according to a CBRE report. With a total of more than 4 million square feet of deliveries, more than 3 million square feet of net absorption and a low vacancy rate of 5.9%, Houston’s retail market experienced one of its strongest years in 2019.

The Houston economy closed out last year with solid fundamentals, as job growth recorded an annualized 2.7%. Last year, Houston added more than 80,000 jobs, up 10% from 2018. Most of the growth is expected to occur in healthcare, government, accommodation and food services, construction and administrative support services, says the report.

Commercial Master
April 6, 2020 / by / in
PA Governor Issues ‘Stay at Home’ Order for Entire State in Response to Coronavirus
From left, Pennsylvania Secretary of Health Dr. Rachel Levine and Gov. Tom Wolf From left, Pennsylvania Secretary of Health Dr. Rachel Levine and Gov. Tom Wolf

HARRISBURG, PA—Earlier this week, Pennsylvania Gov. Tom Wolf and Secretary of Health Dr. Rachel Levine announced that all 67 Pennsylvania counties will be under stay-at-home orders in order to prevent the spread of the Novel Coronavirus.

The stay at home order went into effective April 1 at 8 p.m. Previously, there were 33 counties on stay-at-home orders. The first orders were issued on March 23 for seven counties.

The statewide stay-at-home order will continue until April 30. All Pennsylvania schools will remain closed until further notice and non-life-sustaining business closures remain in effect, while all essential state services will continue.

“This is the most prudent option to stop the spread of COVID-19 across our commonwealth, where cases continue to grow daily,” Gov. Wolf said. “We appreciate the shared sacrifice of all 12.8 million Pennsylvanians; we are in this together and this statewide stay-at-home order is being made after many discussions with multiple state agencies; Dr. Levine; and state, county and local officials as we continue to monitor the most effective ways to save lives and stop the spread of COVID-19.”

“This statewide stay-at-home order is not just to protect ourselves from exposure to COVID-19, but it protects those on the front lines,” Dr. Levine said. “Our doctors, nurses, police, fire, EMTs need us to do this. And the CNAs who are taking care of our family in nursing or long-term care facilities need us to do this. Staying at home doesn’t mean making a daily stop at the grocery store because you need to get out of the house. Staying at home means you must stay at home.”

The following operations are exempt:

• Life-sustaining business activities;

• Health care or medical services providers;

• Access to life-sustaining services for low-income residents, including food banks;

• Access to child care services for employees of life-sustaining businesses that remain open as follows: child care facilities operating under the Department of Human Services, Office of Child Development and Early Learning waiver process; group and family child care operating in a residence; and part-day school age programs operating under an exemption from the March 19, 2020 business closure orders;

• News media

• Law enforcement, emergency medical services personnel, firefighters;

• The federal government and

• Religious institutions.

Commercial Master
April 3, 2020 / by / in
Everything is on the Table As Tenants and Landlords Talk About Rent Relief
Photo by Shutterstock

As the coronavirus continues to wreak havoc on the US economy, commercial tenants and landlords around the US are engaging in conversations about rent relief. These are, to state the obvious, uncharted waters for many of these companies and they are feeling their way in how they handle these negotiations.

In a surprising number of cases, retail tenants are taking a positive stance, Naveen Jaggi, president of Retail Advisory Services at JLL Americas, told listeners on a recent webinar. “Some just can’t afford to pay the rent in April but others have paid their April rent or are offering some form of payback to the landlord in 2021.”

As these negotiations get underway, everything is on the table to deliver relief.

“I have seen instances where landlords have provided near term relief in terms of parking charges and worked with clients in delaying commencement dates,” Tom Maloney, an office tenant rep with JLL Americas, said during the webinar.

“There are multiple ways to structure upfront rent relief,” he added, such as converting unused TIs into rent abatement as one example. Other landlords are offering rent abatement for, say, two months in return for amortizing the balance over a longer term. Some tenants are asking for abatement and in return giving landlords extensions on leases. “That can be attractive to landlords with credit occupiers as they can add some stability to the asset,” Maloney said.

Landlords are also engaging with their own lenders to see what they can offer tenants on forbearance, he added.

For the most part, tenants and landlords are being proactive and cooperative with each other, although there have been exceptions with some tenants engaging in hardball with their landlords, Maloney said. “Our counsel is to pay the April rent and remain current on the loan while engaging with the landlord in a dialogue around relief. We are advising clients to also understand landlords have their own challenges.”

Taking a hardball attitude with a landlord could backfire on the tenant, said Eric Stern, partner and co-leader of the Real Estate Practice at Morgan, Lewis & Bockius LLP, who also participated on the call. “You don’t want to stake out a position where the landlord will have an adverse reaction. You need mutual consent to change the terms of a lease.”

Also, Stern added, in some jurisdictions a landlord could claim that if a tenant just informed it it would not be paying the rent, the landlord could say that was an anticipatory breach of the lease. That opens up a new menu of possibilities for the landlord, as if the tenant had default. “So don’t just tell your landlord ‘this is what I am going to do.’’’

Commercial Master
April 3, 2020 / by / in
Family Feud, Bankruptcy Filings, Coronavirus Loom Over $45M Palm Restaurant Sale
Paul Singerman Paul Singerman, Berger Singerman. Courtesy photo

The sale of an iconic steakhouse brand was accomplished against the backdrop of a longstanding family feud, bankruptcy filings and the looming threat of an economic shutdown from the coronavirus.

Attorney Paul Singerman led the Berger Singerman legal team who worked through the challenges to execute the $45 million sale of the intellectual property of The Palm restaurants, ownership stakes in more than 20 locations and licensing rights to three others.

U.S. Bankruptcy Chief Judge Caryl Delano in the Middle District of Florida approved the bankruptcy sale March 9.

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Buyer Landry’s Inc., a Houston-based hospitality company led by billionaire Houston Rockets owner Tilman Fertitta, paid $45 million in cash and assumed $23 million in liability for debt such as wages, vendors and supplies.

Berger Singerman Miami partners Christopher Jarvinen, Daniel Lampert and Katherine Amador as well as of counsel Phyllis Bean and associate Elliot Rimon worked with Boca Raton-based partner William Shaheen.

For Singerman, a corporate restructuring attorney for over three decades, this wasn’t the biggest-dollar value transaction he’s handled, but it was undoubtedly one of the most complex.

“The family animosity that interfered with a commercial resolution of the case was profound, and the longstanding feud materially impaired the ability to deliver a commercial solution,” said Singerman, who co-chairs the firm. “All of this against the backdrop of the sale hearing occurring on March 9,” the worst day on Wall Street since the financial crisis.

Landry’s, which was the stalking horse bidder in the bankruptcy sale, originally offered $50 million in cash in February but reduced it after the U.S. recorded its first coronavirus cases and local governments encouraged social distancing and closed nonessential businesses.

The acquisition marks the first time in more than 90 years that The Palm is out of the hands of the Ganzi and Bozzi families. Italian immigrants Pio Bozzi and John Ganzi opened the first location in New York in 1926.

Just One More Restaurant Corp. is the intellectual property owner of The Palm. Before its bankruptcy sale, JOMR was 80% owned by Walter Ganzi Jr. and Bruce Bozzi Sr., the third-generation descendants of the founders. The remaining 20% was owned by Garry Ganzi and sister Claire Breen, who are Walter Ganzi Jr.’s cousins and founder John Ganzi’s grandchildren.

Minority JOMR owners Garry Ganzi and Claire Breen sued the majority partners in the name of JOMR in New York, claiming unpaid royalties.

Walter Ganzi and Bruce Bozzi embarked in 1972 on expanding The Palm across the U.S., forming different companies for each new location. They were the sole owners of the new companies and excluded Garry Ganzi and Claire Breen from the ventures.

The siblings claimed Walter Ganzi and Bruce Bozzi were charging their companies below-market licensing fees to use the Palm name and brand at their new locations.

“The first cousins told Ganzi and Bozzi that they were cutting sweetheart deals in royalty and licensing fees to the restaurants you own,” Singerman said, summarizing their argument. “And that’s wrong. You are putting less money into JOMR than the brand and the licensing fees are worth. Because we own 20% of it and it’s better for you and the restaurants you are operating that you own 100% of to pay a lower fee for licensing and royalties.”

Manhattan Supreme Court Justice Andrea Masley in November 2018 awarded a $120 million judgment to the plaintiffs.

This is where Singerman picked up the case, filing a Chapter 11 petition on behalf of JOMR in March 2019.

The goal was to execute on the massive judgment while preserving The Palm or sell it. The family reached a settlement Oct. 10, but it was upended the following day when Walter Ganzi and Bruce Bozzi filed a Chapter 7 petition.

The bankruptcy filings weren’t consolidated, but Delano presided over both. Singerman and his team were JOMR general counsel and transactional counsel for the Chapter 7 trustee.

“The idea was to combine in a single sale process the intellectual property owned by JOMR and the stock of all The Palm steakhouses throughout the country,” he said. “There was great interest nationally in the brand because The Palm truly is iconic.”

Landry’s has closed the Palm steakhouses in Denver and Philadelphia as well as The Palm Too, the second restaurant to open in New York across the street from the original, according to Singerman.

If the deal hadn’t closed when it did, he doubts it would have closed.

By March 9, the U.S. coronavirus cases hadn’t escalated and widespread closures had not been mandated. The stock market had started its downward spiral but had yet to see the harder plunge of the coming weeks.

“While we were in the courtroom, the Dow was headed for a 2,000-point drop,” Singerman said. ”I am immensely proud of the effort of the Berger Singerman team in bringing and holding this together.”

Commercial Master
April 2, 2020 / by / in
That Rent Concession Could Trigger A Loan Liability
Photo by Shutterstock

An untold number of businesses, retailers and renters will be unable to make their rent this month due to the disruption from the coronavirus. Landlords have been urged to work with tenants during this time, offering them concessions where possible. But be careful, warns Morris, Manning, & Martin: rent accommodations may trigger liability under loan documents, joint venture agreements or other contracts.

It writes:

“Almost all loan documents restrict Transfers (broadly defined) of any interests in the property securing such loan, but identify certain “Permitted Transfers” that are allowed. Many loan documents provide that leasing and amending leases in the ordinary course of business are Permitted Transfers if entered into in accordance with the provisions of the loan documents, which usually restrict amendments impacting financial components of leases such as rent amounts, timing for rent payments and lease terms without the lender’s approval.

“That means any leasing activities/lease amendments not entered into in accordance with the Permitted Transfer provisions are Transfers in violation of the Permitted Transfer provision. A violation of the Permitted Transfer provision is almost always a violation of the non-recourse carveout provisions for which the borrower and/or non-recourse carveout guarantor(s) can be liable for 100% of the principal and interest on the loan.”

The firm advises landlords to read their loan documents and, if applicable, obtain the lender’s consent before amending a lease. Also, it said, remember that a lease amendment could be an email from a landlord to the tenant agreeing to waive, reduce, or defer any rent.

Besides the loan documents, other contracts such as joint venture agreements, may have provisions prohibiting rent accommodations/modifications without the counterparty’s consent, the firm also said. “In certain cases, a manager/general partner’s failure to obtain consent from its joint venture partner is afforded no cure right and is presumed to be a bad act for which the manager/general partner can be removed from authority, can lose economic rights (for example, promote distributions), and/or potentially trigger other exit remedies, such as a call right or forced sale.”

Here too, read the joint venture agreement and, if applicable, obtain the counterparty’s consent to any COVID-19 strategy that involves rent accommodations.

Commercial Master
April 2, 2020 / by / in
Phoenix Retail Most Impacted by the Coronavirus Pandemic

Retail and the capital markets are most impacted in Phoenix by the coronavirus pandemic. Retail is, of course, hard hit across the country due to mandated store closures, and widening spreads and tightening lending has also impacted overall investment activity in the market.

“While we await more data to determine impacts at the institutional real estate level, the biggest impacts observed thus far have been relegated to capital markets and retail,” Thomas Brophy, national director of research and analytics for multifamily investments at Colliers International, tells “Obviously, the most impacted asset class to date has been retail with nearly all restaurant/store front operations impacted by the various measures taken by government officials to reduce the spread of the outbreak.  While retail’s disruption started well in advance of the Corona Virus outbreak, it will most likely accelerate the transition to industrial/distribution.”

The capital markets is the less discussed impacted sector, and in Phoenix, it could impact investment activity overall. “With regards to capital markets lenders have been widening spreads, which has, in turn, impacted interest rates,” says Brophy. “While most of the spread increase can, and should, be attributed to the near-term volatility of the virus’ spread and government steps to contain it; lenders are also responding, in part, to the potential impact of delinquent rent and potential vacancies affecting cash flow across all asset types.”

Multifamily, on the other hand, is well positioned to withstand the recession, even with the significant job losses. “Multifamily was, and still is, undersupplied at both the metro and city levels,” explains Brophy. “While construction continues on projects already in the pipeline, we do anticipate there to be some delay in the funding/starting of projects, which commenced at the beginning of the outbreak. Despite this delay, and given federal government’s recently passed stimulus package and the Federal Reserve’s market interventions, should prove limited once we fully emerge from the emergency measures which were put in place earlier in the month.”

In the near term, there will certainly be challenges, but the asset class remains well positioned to out perform others in this market. “While near-term rent delinquencies can be a cause for concern, particularly of renter by necessity properties lenders such as Fannie/Freddie have instituted forbearance options to halt evictions and the Fed continues to keep markets liquid,” says Brophy. “As such, we have not observed owners significantly lowering their rents; rather, more are working with their current tenants or, if in lease-up, offer up-front concessions to preemptively mitigate any potential downside.  As a result, multifamily will continue to be a preferred investor asset class over the medium-to-long term despite significant short-term headwinds.”

Commercial Master
April 2, 2020 / by / in
Centennial Bank Issues $33M for South Miami Student Housing
Bank president for Miami Centennial Southeast Florida division president J.C. de Ona. Courtesy photo

A South Miami student housing project rising near the University of Miami just got a $33.25 million boost.

Developer Treo Group LLC secured the senior construction loan from Centennial Bank for VOX Miami, a transit-oriented development with student housing and a separate office building.

Centennial Southeast Florida division president J.C. de Ona and senior commercial loan officer Jay Brito in Miami issued the financing March 18.

VOX Miami is a $125 million, two-phase project rising near the South Miami Metrorail station at 5949 S. Dixie Highway and part of a larger push by developers and planners to build near mass transit hubs.

These transit-oriented developments, or TODs, are meant to give residents and office workers in the new buildings an opportunity to use public transportation and avoid Miami-Dade County’s congested roads.

Treo Group, a Miami-based private real estate investor and developer, is building VOX at 5801 S. Dixie Highway next to the station and 1.5 miles from UM’s Coral Gables campus.

The other big TOD project near the Metrorail line along U.S. 1 is the 7-acre Link at Douglas Road near the Douglas Road station. Developers 13th Floor Investments LLC and Adler Group LLC are building a 22-story, 312-unit apartment tower with 6,000 square feet of retail as well as a 36-story, 421-unit apartment tower with 17,000 square feet of retail.

The first phase of the VOX project covered by the loan is under construction, The three-story, 99-unit student housing building with 326 beds above a five-story garage will include 5,600 square feet of ground-floor retail.

Amenities for students are to include a deck with a clubhouse, resort-style pool and lounge areas. A gym, study space, cafe, game room, bike storage, pet grooming area and high-speed Wi-Fi are included.

Construction of the student housing is due for completion in time for the 2021-22 academic year.

The second phase of VOX is to be the 195,000-square-foot office building.

Conway, Arkansas-based Centennial has been active in South Florida construction lending. It was the senior lender on a $162 million loan issued last September for developer PMG’s 49-story apartment tower in downtown Miami. Centennial also issued an $8.7 million loan to help pay for the construction of Prestige Cos.’s garden-style apartment project 640 West Apartments in growing Hialeah.

Commercial Master
April 2, 2020 / by / in
CRE Loan Defaults Soar Under Trepp Stress Test But Won’t Be as Bad as Great Recession
Photo by Shutterstock

NEW YORK—To gauge the impact of the COVID-19 disruption, Trepp has applied an economic and real estate forecast scenario to a portfolio of 12,500 commercial real estate loans.

The findings were perhaps to be expected: defaults are expected to increase, in some cases significantly.

Under the scenario Trepp used, the cumulative default rate across commercial mortgages overall will rise to 8%, up significantly from the current 0.4% default rate. The impact will be most immediate and severe in the lodging sector, with a cumulative default rate approaching 35%. The retail sector will also experience elevated defaults, with an estimated cumulative default rate of 16% in the scenario. Other major real estate sectors analyzed, such as office, multifamily, and industrial, will experience more measured increases in distress.

The scenario Trepp used is a modified version of the bank regulators’ Severely Adverse scenario, with changes to capture the more significant expected declines in prices and NOI expected in the lodging and retail segments. This scenario assumes that GDP falls precipitously, the unemployment rate rises (peaking at 10%), interest rates plunge, and asset prices fall. Commercial real estate prices fall 35% over the first two years of the scenario.

Trepp applied this scenario to a portfolio of 12,500 commercial real estate balance sheet loans held by commercial banks that have an aggregate outstanding balance of $77.5 billion. It is a good quality loan portfolio, with a median LTV of 40.9 and median DSCR of 1.82.

This is what Trepp found:

  • The default rate for lodging loans will soar, reaching a peak of nearly 10% by the end of 2021.
  • Retail defaults will also rise sharply, peaking at 3.6% in late 2021 / early 2022.
  • Office default rates will rise, though not as severely. The peak default rate for office loans in this scenario would be 0.8%
  • Industrial and multifamily mortgages will experience smaller increases in default rates, peaking at about 0.5%. For both property types, the expected declines in prices and NOI mean that LTV and DSCR ratios will hold up better, compared to lodging and retail.

The impacts of these higher periodic default rates over the 5-year forecast horizon will mean much higher cumulative default and loss rates for all types of loans, particularly lodging and retail loans.

  • The cumulative default rate for all CRE loans is 8.0%, and with an expected loss severity of 31.7%, the cumulative loss rate will be 2.5%.
  • For lodging loans, the cumulative default rate is expected to be 34.8%, translating into cumulative losses of 13.1%.
  • The cumulative default rate for retail is expected to be 16.0% and cumulative losses will total 5.3%.
  • The other sectors analyzed, including office, multifamily and industrial, will fare comparatively better, with cumulative default rates in the 3% to 4.3% range and cumulative losses in the 0.8% to 1.2% range.

Not as Bad as the Great Recession

Trepp does note that while these defaults will be severe, they are not as bad as the defaults and losses experienced during the Great Recession. For example, peak default rates in the Trepp COVID-19 Scenario are 2.7% for commercial mortgages and 0.4% for multifamily mortgages. Those rates compare to 4.4% and 4.7%, respectively, for the Great Recession.

There are a few reasons for that, Trepp says.

The scenario happens over a shorter time frame, which can lead to somewhat less severe impact when applied in a model. Perhaps more importantly, the portfolio of loans Trepp used for this analysis has good current credit quality, so the loan portfolio is starting out the forecast with overall healthy LTVs and DSCRs. “In the lead up to the Great Recession, lending and transaction volume was very high and underwriting standards had slipped significantly,” it noted.

Commercial Master
April 2, 2020 / by / in
Industrial Logistics Properties Trust Completes Last Deal in $680M Joint Venture
John Murray, president and CEO of ILPT John Murray, president and CEO of ILPT

NEWTON, MA—Locally-based Industrial Logistics Properties Trust reports it has closed on the 12th and final property included in its previously announced $680-million joint venture with an Asian institutional investor.

The property is 100% leased to Amazon. The Asian investor contributed approximately $26 million for the 12th property in addition to the approximately $82 million contributed for the initial 11 properties last month. The investor owns a 39% equity interest in the joint venture and ILPT owns the remaining 61% equity interest in the joint venture.

ILPT previously reported that the 12th property is located at 3350 Laurel Ridge Ave. in Ruskin, FL that is leased to Amazon.

The joint venture also assumed approximately $57 million of existing secured debt on the 12th property in addition to $350 million of secured debt on the initial 11 properties.

John Murray, president and CEO of ILPT, stated, “We are pleased to announce the closing of the 12th and final property included in our first joint venture transaction. With the current uncertain market conditions, we want to reaffirm with our stakeholders that we remain dedicated to executing on our business strategies to find opportunities for potential growth and value enhancement at ILPT.”

The 12 industrial properties contain an aggregate 9.2 million square feet and are located in nine states. As of Dec. 31, 2019, the properties were 100% leased for a weighted average remaining lease term (by annualized rental income) of 7.5 years.

ILPT expects to use the proceeds from this transaction to reduce outstanding borrowings under its $750-million unsecured revolving credit facility.

Commercial Master
April 1, 2020 / by / in
PREIT to Cut Dividend, Capital Projects and Takes Other Measures to Improve Liquidity
Source: PREIT Source: PREIT

PHILADELPHIA—Locally-based PREIT reports that it is taking a number of steps to increase liquidity, including drastically reducing dividends, cutting capital projects, increasing borrowing limits and selling assets in response to the Coronavirus pandemic.

The Philadelphia-based retail REIT estimates the measures will create nearly $300 million in incremental liquidity.

“As we continue to navigate an uncharted operating environment, we are focused on safeguarding the safety and well-being of our associates and communities while enhancing near-term liquidity,” said Joseph F. Coradino, chairman and CEO of PREIT. “PREIT was among the first companies in our sector to embark on a proactive effort to improve our portfolio through anchor repositioning and redevelopment, completing the program ahead of industry peers and in advance of the COVID-19 pandemic. We are now laser-focused on improving our balance sheet to position PREIT for long-term success.”

Among the company’s steps to improve its liquidity include beginning with the second quarter dividend, proposing reducing the dividend by 90% to a quarterly cash dividend of $0.02 per common share. The reduction will enhance company liquidity by approximately $15 million per quarter, or $60 million in additional liquidity on a full-year basis.

PREIT has increased its borrowing capacity by more than $83 million by executing amendments to its senior credit facilities. PREIT is reviewing its capital spending projections and expects to reduce its planned 2020 spending by 11% or $11 million. Based on current forecasts, the company also expects to realize savings of approximately $2 million per month while its mall operations are suspended.

Other mitigation efforts include working with officials to reduce its municipal tax liabilities, which, if successful, could potentially generate savings of more than $10 million.

In addition, its previously announced property dispositions are expected to generate gross proceeds of $312.6 million. These deals include an agreement for the sale-leaseback of five properties, the sale of land parcels for multifamily development at seven properties, operating outparcel sales and the sale of land for hotel development at two properties.

PREIT states t, it expects to net approximately $200 million in additional liquidity at the close of these transactions.

Commercial Master
April 1, 2020 / by / in