The highly-leveraged commercial real estate portfolio owned by Kambiz Shahbazi and his firm KS Partners LLC continues to deteriorate, with six additional buildings totaling 488,000 square feet scheduled to hit the auction block in coming weeks.
Transamerica Life Insurance Co. has moved to foreclose on 1400 Boston Providence Highway in Norwood, a three-building, 159,000-square-foot Class B office park, and 257-259 Cedar Hill Road in Marlborough, two industrial flex buildings totaling 102,000 square feet.
KS Partners acquired the properties in 2003, along with a pair of buildings in Hopkinton. The total purchase price was $31 million. KS refinanced the properties with Transamerica in 2006. The life insurance company put two mortgages, totaling $31 million, on the portfolio.
KS later sold the Hopkinton properties, located at 25-45 South St., to the Parsons Commercial Group. The purchase price in that 2008 deal was $11 million.
The Norwood and Marlborough properties are being auctioned off next week by Paul E. Saperstein Co.
In addition, James R. St. Jean Auctioneers recently advertised an auction at a 217,000-square-foot distribution warehouse at 2189 Westover Road in Chicopee. That warehouse is part of KS Partners’ troubled MBC Portfolio, a 765,000-square-foot package of properties KS acquired in 2005. The servicer on those properties’ securitized mortgage has already moved to foreclose on the other properties in the portfolio, a boutique office building at 31 Milk St. in Boston, and a cluster of Class B commercial buildings in Billerica.
Banker & Tradesman reported last week, KS Partners amassed a 5 million square-foot empire during the commercial real estate boom by aggressively acquiring suburban Class B properties in high-leverage deals. Large chunks of that portfolio are now either underwater, in default, or in foreclosure.
The degrees of leverage Shahbazi’s firm employed, as well as the company’s knack for timely refinancings that took advantage of exploding property values, have largely shielded KS Partners from the foreclosure fallout now afflicting the company’s properties.
Leverage and market timing netted KS Partners positive cash flow from acquiring and mortgaging properties, before accounting for rents and fees. The company netted $52 million in nine transactions, covering 3.6 million square feet. The Transamerica portfolio was not included in those totals.
