DRA Office Portfolio Facing Cash Squeeze

A DRA Advisors fund is at risk of losing 16 office buildings it inherited via the 2005 takeover of CRT Properties.

DRA is more than 90 days late on payments for a $180.9 million securitized mortgage. The loan's special servicer, LNR Partners, has assigned an attorney to begin foreclosure proceedings, according to a securitization report this month. DRA is negotiating with LNR about a possible modification or extension of the loan, said Paul McEvoy, senior managing director of the New York firm.

If those talks are unsuccessful and DRA is unable or unwilling to pump in additional equity, the fund would have to surrender the properties. The vehicle is under the gun because the interest-only loan is scheduled to mature in October.

The 1.5 million-square-foot portfolio contains a seven-building complex in Jacksonville, a five-building complex in Orlando, two buildings at a complex in Charlotte and two buildings at an office park in Rockville, Md. They were formerly owned by CRT Properties, a REIT in Boca Raton, Fla., that controlled 11.7 million sf of properties.

The DRA fund teamed up with Colonial Properties in November 2005 to buy CRT for $1.8 billion. The transaction valued the 16 buildings at $226 million. Last November, DRA acquired Colonial's 15% stake in those properties, although Colonial, a REIT in Birmingham, Ala., still manages them.

The portfolio's occupancy rate fell to 75% in 2008, from 95.6% in late 2005, according to the most recently available information. By that time, the buildings weren't generating enough cash flow to cover the $9.8 million of annual debt service.

Seven of the buildings make up the 751,000-sf Freedom Commerce Center, a Class-B complex in Jacksonville that was developed between 1987 and 2001. Five others constitute the 384,000-sf Orlando University Center in Orlando. That complex was constructed between 1988 and 2001. The rest of the portfolio consists of two buildings, totaling 183,000 sf, in Charlotte University Center in Charlotte and two buildings, totaling 155,000 sf, in Decoverly Office Park in Rockville, Md.

J.P. Morgan securitized the mortgage in November 2005 via a $2.2 billion pool (J.P. Morgan Chase Mortgage Securities Corp., 2005-CIBC13).

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