Villas Parkmerced was in the news last week because they are defaulting on their loan. To the point initially made by crabsofsteel, it's Rockpoint and Stellar Management, and they are in second place (behind Lichenstein's Lighstone) for the worst CRE deals. One of their favorite trades was to go after decent multifamily projects in rent controlled municipalities (this one in San Fran, also Riverton in NYC), throw in a ton of leverage, a few upgrades, kick out the pesky rent control tenants, and move in the market paying renters. Vantage Properties and Apollo RE Advisors were another prolific JV in this same space - they're the proud owners of Savoy Park, Broadway Portfolio, Esquire Portfolio, and others.
As if to make the precise point that it's really not any easier in San Francisco than it is in NYC, Villas Parkmerced has been involved in tenant harassment suits going back at least as far as September 2008.
Apparently, they don't believe they'll be able to refinance at maturity (in October of this year) and are now with the Special. They have not missed any payments to date, unless they skipped this month, which really wasn't clear from the article. The senior note is performing fine with a 1.5x DSCR at the end of 2009 - however, the senior is $300mm, and there is an additional $250mm. At 5.65% coupons -- $31.075mm in debt service. They're clearing $30mm in NOI and NCF at YE 2009 at 100% occupancy, but were underwritten to $40mm NOI. Anyways, they're short.
Loan Structure - I may have some of the details off, but here's a rough guesstimate at the loan structure based on the servicer notes, the prosup for the deal, and a few other comments. Not sure who the owners are, but that would be interesting... I believe portions of it, if not all, are in SPAF 2006-1 and PRIMA 2006-1, both CRE CDOs, but I don't really have the details for these.
|Loan Part||Size||Loan Number||Location|
|A1||$300,000,000.00||30252733||CD 2006-CD2 Pooled|
|B1||$ 50,000,000.00||30254323||CD 2006-CD2 Directed (VPM tranches)|
At a 9% cap, using YE 2009 NOI, it's worth $334mm. At a 5% cap, that shoots up to $602mm. The upside is that the bigger deals seem to be getting financing more easily, and this one has a decent story.
Try to buy the rakes cheap? The AJ traded last week after the news, but no color. The A4 trades relatively tight. The A2 & A3 should be trading wider than they are given the extension risk (but in Bloomberg, anyway, extending this out 24 - 48 months doesn't affect the cashflows - me thinks they have a broken model on this deal. You have to be really careful with their cashflow models in CMBS, they make more mistakes than their more expensive counterparts).