In February 2009, The Bethany Group, an Irvine, Calif.-based apartment owner, made headlines when it essentially abandoned its Phoenix portfolio. Though it filed for bankruptcy protection in March 2009, many of its portfolios are still in so much flux (even under new ownership) that its making the most ardent industry watcher’s head spin.
The situation highlights yet another reason why the special servicing process frustrates so many people. And it's one that no one seems to have a good answer about.
Bethany’s Austin, Lonestar, and Maryland loans were modified and assumed by entities controlled by Standard Portfolios through the bankruptcy court on in January 2010. This included 16 properties and 4,946 units, according to Trepp, a New York based provider of CMBS and commercial real estate information, analytics, and technology.
In March 2010, Standard modified the loans with a five-year extension, according to Trepp. But in late February, New York-based Fitch reported that the Bethany Maryland Portfolio, part of the larger Lonestar and Austin modification, was transferred to special servicer LNR Partners because of imminent default (with a balance of $296.7 million).
The Maryland Portfolio I included three properties: the Willow Lake Apartments (456 units), built in Laurel, Md., in 1962; the Quail Hollow Apartments (336 units) built in Glen Burnie, Md., in 1972; and the Woodhill Apartments (334 units) built in Glen Burnie, Md., in 1968.
The Maryland Portfolio II transferred into special servicing almost two years ago, according to Trepp. That portfolio included: the Seasons at Bel Air Apartments (732 units), built in Bel Air, Md., in1975; the Coopers Crossing Apartments (727 units) built in Landover Hills, Md., in 1963; and The Henson Creek Apartments (450 units), built in Temple Hills, Md., in 1966.
In all, Trepp reports that Bethany had five CMBS pools, totaling more than 12,000 units. “They had a number of different loans, and some of the loans had multiple properties in them,” says San Diego-based Trigild president Bill Hoffman, who worked with the Bethany loans that ended up with Midland (representing properties in Arizona, Colorado, and Texas). “Everything went bad.”