Cabi Defaults on Commercial Mortgage, Hines Takes over 8 CA Buildings

Cabi Developers is a division of the Mexican real estate giant GICSA, they bought the portfolio of buildings from Arden Realty just 19 months ago for $1.51B. To facilitate the deal they borrowed $1.35B from 11 lenders including the REIT Hines, based in Houston, TX.

To make a long, depressing story short, Cabi missed a $105MM debt payment in October and, due to the credit squeeze and higher refinance standards, would have missed all subsequent repayments. Hines was the lead lender and negotiated a settlement with all parties that gave Hines control of the buildings and avoided formal foreclosure. I read the story in the San Diego Tribune.

Is this a sign of things to come? I’m afraid it is.

I bet Hines and the other 10 lenders who are taking a billion dollar bath on this fiasco won’t be making any more 90% LTV (loan-to-value) loans any-time-soon.

LTVs have necessarily come down; there is no liquidity out-there for highly leveraged deals anymore. Our firm is, however, originating conventional (fully underwritten, fully documented) commercial mortgages up to 75% LTV on properties that cash-flow. Privately funded loans are coming in at 60-65% LTV. Borrowers and sponsors can apply for a commercial mortgage loan online at www.masterplancapital.com

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