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 10 New King Street is a 50,000 square foot, Class A office building with 185 parking spaces located on 2.8 acres adjacent to the Westchester County Airport in North Castle, New York. It was acquired in May 2001 as part of a two-building portfolio (along with 118 North Bedford Road) from John Hancock Life Insurance after foreclosure. The purchase price was $6.2 million. Total project cost was $7.3 million. It was sold in September 2003 for $10.2 million.
 .Market Opportunity
A relatively new and attractive building that was well leased, 10 King Street fell into default because over-improvement relative to obtainable rent made it difficult for the property to service its debt. As a result, the lender foreclosed, which often provides the opportunity to acquire well-located assets at discounted pricing.
.Acquisition
CCGL’s predecessor company was outbid in the original auction in August 2000. However, after the selected buyer withdrew his offer, CCGL’s predecessor company was able to acquire the property almost a year later for less than its original bid and significantly less than reproduction cost.
.Results
A minor common area upgrade was completed and occupancy increased to 100%. The building was refinanced with a long-term, fixed-rate mortgage, which produced substantial excess proceeds. Although the property was not on the market, CCGL’s predecessor company was approached to sell it and negotiated a favorable price of over $200 per square foot. The sale closed in September 2003.
CCGL affiliates owned a 33.3 % interest in the property, of which CREF I owned 19.5 %. The remaining 80.5% of CCGL’s interest in the property was owned by another CCGL affiliate. The remaining 66.7% of the equity was owned by two professional real estate investors secured by CCGL. CREF I’s interest was financed by redeploying proceeds from the refinancing of another portfolio property. The effective annual internal rate of return to the CREF I investors was 24.5%, net after all fees and carried interest to CCGL and its affiliates.
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