Map: A have a look at CGI Service provider’s unraveling actual property investments amid mounting debt woes

Raoul Thomas is having a helluva 12 months. 

Thomas’ Miami-based CGI Service provider Group is getting pummeled with foreclosures filings and experiences of delinquent mortgage funds, placing practically its whole portfolio amassed over 20 years into debt bother. 

It’s not the primary powerful time for CGI Service provider. The agency weathered the pandemic slowdown. However the present financial headwinds –– outlined by elevated rates of interest, skyrocketing insurance coverage and skittish lenders –– have confirmed powerful to beat.

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CGI faces foreclosures on a South Seaside resort and a pair of workplace buildings in Coral Gables and Miami’s Coconut Grove, in addition to experiences of delinquent debt funds on a number of workplace properties, together with a part of its Nexus Workspaces co-working portfolio. All this comes after CGI misplaced two of its marquee buildings, a resort in downtown Miami and the Waldorf Astoria Washington DC, which is the previous Trump Worldwide Resort that Thomas purchased from the president-elect in 2022. 

Via all of it, Thomas has remained steadfast in his makes an attempt to maintain his properties. Working example: He has not voluntarily walked away from a single constructing, looking for a exercise similar to an fairness infusion or recapitalization as much as the final minute earlier than scheduled auctions. 

CGI is engaged on a “international answer” that’s “very near being finalized” and can tackle the “portfolio’s capital challenges,” that are on account of elevated rates of interest, stated a supply aware of the matter. 

CGI has stated it was all the time present on debt obligations previous to the present elevated rate of interest setting. 

A few of its properties have fixed-rate loans with maturities this 12 months. For landlords on this scenario, refinancings are sometimes at increased charges and are usually tough to safe as a result of lenders have develop into extra conservative and particularly reluctant to finance places of work. 

CGI’s woes counter a typical narrative that South Florida shall be extra resilient to headwinds. The inflow of out-of-state residents and companies prompted hefty leasing and report rents over the previous 5 years, main some within the trade to suspect the tri-county area will climate the financial slowdown. That’s turned out to not be the case, as buyers throughout the area and asset courses are feeling the sting from increased prices that aren’t offset by rental earnings. 

Right here’s a roundup of CGI’s buildings which can be below siege by lenders. 

Nexus places of work

CGI’s co-working supplier Nexus has 5 outposts largely in South Florida. 

Final month, CGI Service provider was 30 days delinquent on assembly its funds for the mortgage on Nexus places of work at 2101 Vista Parkway, close to West Palm Seaside, in addition to at 8401 and 8461 Lake Value Street close to Wellington, in response to Morningstar Credit score. The mortgage is also backed by the constructing at 850 Northwest Federal Freeway in Stuart in Florida’s Treasure Coast. 

In 2018, CGI Service provider scored a $15.7 million refinancing from Starwood Mortgage Capital, an affiliate of billionaire Barry Sternlicht’s Miami Seaside-based Starwood Capital Group. The mortgage, which now has a steadiness of $14.2 million at a hard and fast 5.39 % rate of interest, matures in June, Morningstar Credit score information exhibits. The financing is “watchlisted,” a standing indicating issues over a borrower’s means to fulfill debt obligations, although loans maturing quickly usually are placed on a watchlist. 

CGI Service provider was hit with sudden expenditures similar to substitute of heating, air flow and air-con programs and different crucial repairs, stated an organization consultant. The agency has made and is making funds to Starwood to cowl what it owes, the consultant stated. 

The 2101 Vista Parkway constructing was accomplished in 1989. The 8401 and 8461 Lake Value Street buildings had been completed in 2006, and the Stuart constructing was accomplished in 2005, in response to data. CGI purchased them in 2013 in three offers for a mixed $12.6 million. 

The Nexus portfolio -– which additionally consists of the workplace buildings at 20283 State Street 7 close to Boca Raton and 1375 Gateway Boulevard in Boynton Seaside, which aren’t backed by the Starwood mortgage –– is slated to be bought to Santa Monica, California-based GBT Applied sciences. The deal is also for the Nexus mental property.  

The mental property consists of its reserving and billing software program and different expertise. The co-working supplier, which has 800-plus tenants, provides “digital places of work,” permitting tenants to have an workplace at every Nexus outpost, and bookings for staging areas for enterprise displays, convention rooms and occasions, Thomas stated, including that the tech facet of the portfolio provides vital earnings. 

The lease earnings from tenants additionally has upside potential, he stated. A current assessment of comparable co-working area suppliers confirmed the typical trade lease ranges from $80 per sq. foot to $100 per sq. foot, whereas Nexus’ lease now’s at about $60 a sq. foot, Thomas stated. 

GBT’s buy shall be phased, beginning with the acquisition of a 49 % stake within the property in Stuart, in addition to these close to West Palm and Wellington, in response to a GBT information launch. 

A valuation for the GBT deal is unknown. CGI and Thomas declined to touch upon the Nexus sale worth, and GBT didn’t return a request for remark. 

55 Miracle Mile 

CGI Service provider owns the workplace and retail portion on the Ten Aragon Condominium in Coral Gables. 

In November, the mortgage on the property at 55 Miracle Mile entered special servicing for being over 60 days delinquent on funds, in response to Morningstar Credit score. CGI secured a $25 million refinancing in 2018 from Starwood Mortgage Capital at a hard and fast 5.49 % rate of interest, with the present steadiness being $24.2 million, Morningstar Credit score exhibits. The financing matures in June. 

CGI’s industrial area at Ten Aragon is 89 % occupied, in response to Morningstar. 

Much like the Nexus portfolio, CGI has been making and is making funds on the overdue quantities, an organization consultant stated. 

The constructing’s debt bother comes after Florida legislators imposed stricter necessities for inspections and reserves on condominium buildings because of the lethal Surfside collapse in 2021 that killed 98 folks. Ten Aragon was accomplished in 2004, that means it’s not but due for its first 30-year recertification. However by the top of final 12 months, all condominium associations had been required to finish a Structural Integrity Reserve Study, together with for roofs, load-bearing partitions and foundations. Budgets accepted after the SIRS is accomplished have to incorporate reserves to finish the objects the examine recognized as needing work. Beforehand, funding reserves was optionally available. 

The Surfside collapse and follow-up laws have led condominium associations to give attention to generally long-deferred upkeep wants, prompting multimillion-dollar assessments. 

At some mixed-use complexes that include condos, in addition to retail and places of work, like Ten Aragon, the industrial areas’ homeowners additionally could possibly be on the hook for frequent space upkeep bills. 

CGI’s portion of Ten Aragon additionally has caught the curiosity of potential patrons, who’ve put in provides for the property, in response to a supply. 

3480 Predominant Freeway 

Most not too long ago, CGI Service provider was hit with a foreclosures on its headquarters constructing at 3480 Predominant Freeway in Miami’s Coconut Grove. 

New York-based lender Madison Realty Capital filed a Uniform Business Code foreclosures on a $4.7 million debt on the constructing, in response to a public discover. 

In 2021, Madison offered a $35.5 million financing, data present. The lender is foreclosing on the $3 million mezzanine portion of the mortgage, which now’s $4.7 million, inclusive of curiosity. 

A UCC public sale is scheduled for Jan. 28, with Madison reserving the proper to credit score bid. In a UCC process, the lender auctions the possession curiosity within the CGI affiliate that owns the constructing, and the successful bidder additionally should assume the remaining $32.5 million portion of the mortgage. 

CGI paid $3 million for the constructing in 2014, in response to data. Data additionally present that the property has about $322,300 in liens filed final 12 months, together with two liens from Colliers’ work securing two tenant leases in 2023, and one lien from the state for unpaid gross sales and use tax.  

The constructing is totally leased and “in extraordinarily nice well being,” a CGI consultant stated in an announcement. 

Tenants embody Stage 6 rooftop restaurant and Lebanese restaurant Amal. World security tech and providers agency Wrap Applied sciences leased 4,500 square feet in October. 

CGI is in talks with the lender to succeed in “an amicable answer” that will negate the public sale,an organization consultant stated, including that “extraordinary circumstances” and elevated rates of interest led to the debt bother. 

The UCC submitting on 3480 Predominant Freeway marked the fifth foreclosures towards CGI Service provider since final 12 months. 

550 Biltmore Manner 

In Coral Gables, lender Cerberus Capital Administration final month filed a UCC foreclosures on the mortgage for CGI’s 15-story 550 Biltmore Manner workplace constructing. 

In 2019, CGI paid $54.4 million for the constructing and borrowed a $46.5 million mortgage from MSD Companions. (The lender now’s BDT & MSD Companions following a merger.) CGI refinanced with Cerberus in 2021, bumping the entire to $48.7 million, in response to data. 

The property is 90 % occupied, however is slated to lose UBS this 12 months, after the financial institution signed a brand new lease elsewhere.  

CGI has stated it’s working with the lender for a “mutually constructive decision.” 

The public sale, initially scheduled for Dec. 19, was postponed to Thursday after which postponed once more. Postponements of UCC auctions signify {that a} developer and lender are in talks a few potential recapitalization, fairness infusion or one other exercise that will keep away from an public sale. 

Gabriel South Seaside 

The 132-key Gabriel South Seaside resort at 620-650 Ocean Drive in Miami Seaside has been below a UCC foreclosures since Might. 

The auction has been postponed a number of occasions, most not too long ago to Feb. 12, signifying ongoing negotiations between the borrower and lender. 

CGI, by its hospitality alternative fund that counts retired baseball participant Alex Rodriguez amongst its buyers, purchased the resort for $108.6 million in 2021. The foreclosures is over a $71.1 million mortgage CGI borrowed in 2021 from Deutsche Financial institution, data present. 

Gabriel Downtown Miami and Waldorf Astoria DC

Aug. 5 was not a very good day for CGI. The agency misplaced in foreclosures each its Walford Astoria Washington DC and its Gabriel Downtown Miami motels to lenders. 

Thomas had been making an attempt to refinance a $285 million mortgage on the Waldorf Astoria, however lender BDT & MSD Capital Companions bought uninterested in ready, foreclosing on the property after suspending the public sale by 45 days. CGI’s resort fund had paid $375 million to the Trump Group for the constructing’s leasehold curiosity in 2022. 

The debt woes arose partly due to a $35.4 million switch tax invoice tacked on by the District of Columbia on the time of closing. That quantity was far more than the Trump Group had paid when it purchased the property and in addition greater than the $9 million switch tax the agency had anticipated, Thomas advised The Actual Deal in an interview final summer time. The invoice ate up CGI’s roughly $40 million reserve fund for the property. 

In Miami, Madison Realty Capital took title of the 129-key resort at 1100 Biscayne Boulevard in downtown Miami. The Gabriel Downtown Miami is a part of the posh Marquis condominium advanced. Madison’s UCC foreclosures was over a $60.4 million mortgage it had offered in 2021. Data present the resort was transferred to the lender by a deed-in-lieu of foreclosures.