An Australia-based owner of dozens of Chicago-area industrial buildings has run into troubles on a $123.5-million loan package that comes due in August.
The loans to Mirvac Industrial Trust, which were bundled with others into commercial mortgage-backed securities (CMBS), were transferred last month to a special servicer because a payment is more than 30 days overdue and "imminent default" is expected, according to a CMBS loan report compiled by Bloomberg L.P.
Two Mirvac executives, however, say the missed payment was an oversight and that there won't be a payment default. Mirvac is awaiting instructions on transferring debt payments to the special servicer and has adequate cash on hand for debt payments, they say.
The servicer, a company that works out problem loans for CMBS investors, was brought in so Mirvac could seek an extension of the Aug. 7 maturity, Nicholas Blake, a Mirvac trust manager, says in an e-mail.
The loans are on 14 properties that total 5.1 million square feet. The properties, 13 in the Chicago area and one outside Milwaukee, are part of a larger portfolio Mirvac bought in 2005 from Oak Brook-based CenterPoint Properties.
Mirvac, a publicly held company in Australia, disclosed last month that it was seeking a two-year extension of the mortgages, a $117.45-million fixed-rate, interest-only loan and a $6.07-million floating-rate loan. "A resolution of the extension process is not expected until closer to the time of maturity," Mirvac said in the Feb. 17 statement.
The CMBS report shows that the 14 properties were generating enough cash at the end of last year to cover debt-service payments. Still, Mirvac could have a hard time restructuring or refinancing the loans because the value of the properties has fallen sharply, and lenders are now providing a lower percentage of a property's value in loans.
"Borrower has provided a list of 10 financial institutions that have been approached for refinancing without success," the report says, without identifying the prospective lenders.
Even as local industrial vacancy rates have risen to their highest levels in at least 19 years, eclipsing 12% at the end of last year, big loan defaults have not been common. But Mirvac's situation underscores the continued difficulty real estate investors are having as they try to refinance ? even when the properties are generating enough income to cover debt payments.
In the five months ended Dec. 31, net cash flow of the 14 Mirvac properties was $4.75 million, compared with debt service of $3.15 million, according to the CMBS report. A call late Tuesday to the loan servicer, Midland Loan Services L.P., wasn't returned.
In 2005, Mirvac bought a 95% stake in the 14 warehouses and 27 other industrial properties, which combined total some 10 million square feet, from CenterPoint for about $370 million. Early last year, Mirvac acquired CenterPoint's remaining 5% interest when the two firms' joint-venture agreement was due to expire.
The 14 properties are:
21705-21707 W. Mississippi St., Elwood, 1.02 million square feet
28160 N. Keith Drive, Lake Forest, 77,924 square feet
9700 S. Harlem Ave., Bridgeview, 101,140 square feet
800-850 Regency Drive, Glendale Heights, 48,230 square feet
3602 N. Kennicott Ave., Arlington Heights, 94,300 square feet
7200 S. Mason Ave., Bedford Park, 207,345 square feet
6510 W. 73rd St., Bedford Park, 306,552 square feet
1445-1645 Greenleaf Ave., Elk Grove Village, 150,000 square feet
3145 Central Ave., Waukegan, 292,000 square feet
27413 S. Baseline Road, Elwood, 213,500 square feet
900 E. 103rd St., Chicago, 531,461 square feet
W165 N5830 Ridgewood Drive, Menomonee Falls, Wis., 300,120 square feet
2727 W. Diehl Road, Naperville, 440,343 square feet
308 S. Division St., Harvard, 1.33 million square feet
http://www.chicagorealestatedaily.com/article/20100324/CRED03/200037555/mirvac-faces-struggle-to-refinance-industrial-loans
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