Commercial Properties Realty Trust, the for-profit real estate arm of the Baton Rouge Area Foundation, has reached an agreement to transfer the Bon Carré Business Center on Florida Boulevard back to its lender after defaulting on a more than $36 million mortgage.
The center—once the Bon Marche Shopping Center and now home to the Louisiana Technology Park, Cox Communications and other tech-related tenants—was a signature project of CPRT, which acquired the 43-acre site and its 772,000-square feet of space in 2003 to enhance the Florida Boulevard corridor and stimulate economic development in the area.
But in mid-March, U.S. Bank National Association, a trustee for the lender of the property, filed suit in the U.S. Middle District Court against Bon Carre Business Center II LLC, which is owned primarily by CPRT. The suit totals CPRT’s liability at nearly $39.5 million, including the bulk of the loan, which was due in April 2017, plus more than $3 million in interest and fees.
CPRT attorney Charles Landry says his client is working cooperatively with the lender to turn over the property as quickly and seamlessly as possible and that tenants won’t notice any changes.
“We intend to cooperate with the lender and the successor ownership for a smooth transition,” Landry says.
Several factors came together in 2017 to make ownership of Bon Carré no longer sustainable for CPRT, Landry says. For one, the 10-year mortgage on the property, originally a nearly $42 million loan, came due last April with a $36.1 million nut.
Second, the property’s Enterprise Zone Tax Exemption, which capped its property taxes at $80,000, expired and its tax bill increased nearly 10 times to $796,000.
Third, occupancy at the center had fallen to some 68%, down from more than 80% earlier in the decade.
“It was the perfect storm year,” Landry says. “They had 68 percent occupancy, their loan matured and the tax cap came off, which removed between $7 million and $8 million worth of value on the property. So where does that leave you?”
In September 2016, months before the tax break was set to expire, CPRT began actively trying to sell the property. But after months on the market, it received just one offer, which was lower than the balance of the loan.
CPRT continued to pay its monthly note on the mortgage even after it came due last year in hopes of working out a deal with the lender, Landry says. It also shopped for a new lender, all with no success.
“Commercial Properties never failed to pay anything that was due,” Landry says. “But when it became clear the lender wasn’t going to extend the loan, we offered to transfer it.”
Landry can’t put a total price tag on the overall hit CPRT took with Bon Carré but he says “it’s a lot.” The firm had paid down more than $6 million on its 2007 mortgage and invested tens of millions more in the mid-2000s renovating the property. In 2013, it spent $2 million more buying out a handful of investors who had a small ownership stake in the property.
Attorney Brett Furr, who represents the lender, says negotiations with CPRT have been amicable and that the firm did “everything possible to make a go of it.”
Says Furr: “They took a property that was basically a hell hole and did something really positive with it but the economics just haven’t worked out. It’s no reflection on them.”
