Almost 42 months after it was founded and now a victim of one of the worst real estate slumps in memory, Hartford-based CBRE Realty Finance Inc. is breaking ties with its big-name, West Coast partner.
Beginning Jan. 1, CBRE Realty Finance will officially take over managing its $1.4 billion portfolio of commercial real estate debt and equity investments from CB Richard Ellis Group Inc. The Los Angeles commercial property brokerage giant has managed the REIT since its formation in May 2005.
As part of the separation, CBRE Realty Finance is changing its name to Realty Finance Corp., according to the company’s recent 10Q filing with the Securities and Exchange Commission.
Word of the separation was more bad news on top of another tough third quarter for CBRE Realty, which was recently suspended from trading on the New York Stock Exchange for failing to meet minimum market capitalization requirements.
The REIT lost $55.5 million, or $1.81 a share, in the quarter ended Sept. 30. A year earlier, it lost $49.9 million, or $1.64 a share.
The filing also declares, among other things, that co-founders Michael J. Melody and David P. Marks have resigned from CBRE Realty’s board of directors, where they have served since 2005.
“As we continue to navigate through one of the most difficult credit environments in history,’’ Kenneth J. Witkin, CBRE Realty president and chief executive officer, said in a recent statement, “we are continuing to proactively manage our portfolio and preserve liquidity.”
It was during that heady period of real estate mortgage finance in the United States that CB Richard Ellis and then Melody & Co. created a partnership to invest in all kinds of real estate-related instruments.
These included, according to the 10Q filing, whole loans, bridge loans, mezzanine loans, subordinate interests in whole loans (so-called “B’’ notes), and commercial mortgage-backed securities.
In all, CBRE Realty told securities regulators that the carrying value of its investment portfolio was approximately $1.4 billion, as of Sept. 30. However, the value of the portfolio has fallen 15 percent since Dec. 31, 2007 due to limited access to capital for refinancing, rising numbers of loans in which payments have stopped or fallen behind, and reduced cash available to distribution to the REIT’s stockholders.
Things have gotten so bad, the company recently announced, that its 30-day average market capitalization fell below the mandatory threshold to retain its shares on the NYSE. As a result, CBRE Realty shares have been reduced to being quoted in over-the-counter stock listings, or “pink sheets,’’ pending NYSE’s attempts to delist the stock or the company’s minimum capitalization is restored.
The REIT said that, as of Sept. 30, its $18.7 million in cash and equivalents was “sufficient to meet our liquidity requirements for at least the next 12 months,”
REITs are required, for tax purposes, to distribute at least 90 percent of their taxable income to stockholders as their loans or investments are repaid or sold. But CBRE Realty said that unless it begins lending again, its investment portfolio likely will continue to shrink.
A shrinking portfolio, it said, also affects, the income distribution to stockholders. The dividend has already shrunk to a nickel a share as of Sept. 30, down from 17 cents in the third quarter a year earlier.
Geenty Signs On
The owner of a Clinton distribution facility is searching for a new tenant for the building described as the only one of its size along the shoreline.
Kent Home Associates LLC of New York has hired daughter-and-father brokers Kristin and Kevin Geenty, principals in The Geenty Group Realtors, Branford, to replace a mattress distributor who by March will vacate the 186,000-square-foot building at 30 Old Post Oak Road-Route 145.
Built 40 years ago for consumer-products company Chesebrough-Ponds, now part of giant Unilever, the structure has 14 tractor-trailer docks, a railroad siding and a high ceiling suited to warehouse or light-industrial use, Kevin Geenty said. The lease rate of $3.35 a square foot per year reflects the landlord’s eagerness to lure a tenant and is partly an admission that the building’s location is less than ideal, Geenty said.
Similar facilities closer to I-91 between New Haven and Meriden command annual rents closer to $5 a square foot, he said.
Greg Seay is a Hartford Business Journal Web editor.
