CBRE Weighs Strategic Moves
After Posting a Q4 Loss
CBRE Realty Finance Inc., a real-estate investment trust that makes and invests in commercial-property loans, said it is considering strategic "initiatives" after posting a fourth-quarter loss partly due to bad loans tied to developer Harry Macklowe.
The company, which has lost more than 70% of its market value since its initial public offering in October 2006, said it had hired Goldman Sachs Group Inc. to help explore "a wide range of strategic and operational initiatives." CBRE Realty declined to elaborate but in similar situations options have included possible sales of businesses or equity infusions.
The company's single-largest shareholder, Arbor Realty Trust Inc., in August offered $8 a share to acquire it, but was rebuffed.
The Hartford, Conn., company, an affiliate of property services firm CB Richard Ellis Group Inc., recorded a fourth-quarter loss of $17.8 million, or 59 cents a share, compared with year-ago profit of $3.55 million, or 12 cents a share. The latest results were dragged down by a $19.7 million loan-loss reserve. The company attributed $19.2 million of that to its $82.8 million of loans made to properties owned by Mr. Macklowe. It booked no such reserve in the year-ago period.
CBRE Realty, which disclosed new detail about its loans to Mr. Macklowe yesterday, said it has made him two loans, both of which are considered non-performing, bringing its total nonperforming loans to $94.8 million, or 4.6% of its total assets.
CBRE Realty wouldn't say what the loans are for, but people familiar with the matter say one loan, for $42.8 million, is the junior-most position on a $510 million loan for an office building being developed at the site of the former Drake Hotel on New York's Park Avenue.
Mr. Macklowe, through his son William, declined to comment.
During a conference call yesterday, Chief Executive Kenneth J. Witkin said, "We continue to be optimistic that we'll be able to fully recover these investments." He didn't give more details, citing confidentiality agreements.
CBRE Realty's detailing of its loans to Mr. Macklowe yesterday was a victory for Arbor, a Uniondale, N.Y., REIT, which has been calling for a detailed accounting of CBRE Realty's exposure to Mr. Macklowe. An Arbor spokesman declined to comment.
The Drake loan has been in default since late last year. Mr. Macklowe has had a de facto extension for more than three months because the loan is held by several lenders and they can't agree on terms of an extension deal, according to people familiar with the matter.
Mr. Macklowe, who is under siege on many fronts, has been trying to solve his problems on the Drake by attracting partners or big-name tenants. At one point, Related Cos., one of the country's biggest developers, had discussed joining Mr. Macklowe on the retail portion of the proposed project.
But Related Cos. is no longer considering being involved, says Kenneth Himmel, chief executive of Related Urban.
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