2 Dallas properties handed back to Capri Capital
(Crain's) — Capri Capital Partners LLC has taken control of two office complexes in Dallas after the Chicago-based investment firm alleged that the owner, BentleyForbes LLC, defaulted on mezzanine loans.
BentleyForbes transferred the two properties, Preston Commons and Sterling Plaza, to Capri late last month, a spokesman for Los Angeles-based BentleyForbes confirms.
"This was not an action taken lightly by BentleyForbes, but a prudent investment decision based on sound investment principles and our analysis of current market fundamentals," the company's president and chief operating officer, James Kasim, says in a statement.
He adds that after months of working to resolve issues with Capri, it ultimately made sense for BentleyForbes "to relinquish its interests in these specific assets since a meaningful modification to the existing financing structure could not be attained."
Capri filed three lawsuits Dec. 24 against BentleyForbes in Cook County Circuit Court over loans on the two Dallas properties and an equity investment Capri made with BentleyForbes in the Watergate office and retail complex in Washington.
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The mezzanine loans and Capri's preferred equity investment in the Watergate came from a Capri fund, Capri Select Income II, which has had annual losses of 18.6% over the three-year period ended Sept. 30, according to data obtained from an investor in the fund, the Teachers' Retirement System of Illinois.
Capri had sought court approval to sell BentleyForbes' stake in the two Dallas complexes and to remove the company as manager of the Watergate complex.
A spokeswoman for Capri declines to comment.
Mr. Kasim says in the statement that BentleyForbes and Capri have reached a "standstill" agreement on legal proceedings regarding Capri's investment in the Watergate and the Four Seasons Resort & Club near Dallas, site of the annual EDS Byron Nelson Championship golf tournament. He says the firms continue negotiations over those properties.
"It is the hope of both parties that these ongoing negotiations will lead to positive outcomes that position these two assets for long-term success," Mr. Kasim says in the statement.
Industry newsletter Real Estate Alert first reported that BentleyForbes had handed over its stakes in the Dallas office buildings to Capri.
In its lawsuits, Capri says it made mezzanine loans on the two Dallas office complexes totaling $14.95 million. The firm says BentleyForbes defaulted when it missed a quarterly "excess cash flow payment" due Oct. 30 and a "minimum pay rate amount" due to Capri on Nov. 15.
Capri also alleges that BentleyForbes defaulted by using money from a reserve account without Capri's approval and because the loans' guarantors don't have net worth of $7.5 million.
Similar grounds were raised in Capri's suit over the Watergate, where Capri made a total equity investment of $14.3 million compared with BentleyForbes' $9-million investment in the 2005 purchase of the historic complex. In the Watergate suit, the guarantors are identified as C. Frederick Wehba II and a trust headed by Mr. Wehba and Susan D. Wehba.
Mr. Wehba and his father co-founded BentleyForbes in 1993, and Mr. Wehba is now the firm's chairman and CEO, according to its Web site. BentleyForbes owns high-profile office buildings nationwide, including the two-tower Prudential Plaza in Chicago.
