118 North Bedford Road  is a 36,600 square foot, Class A office building with 121 parking spaces located on 2.5 acres in Mt. Kisco, N.Y.  It was acquired in May 2001 as part of a two-building portfolio (along with 10 New King Street) from John Hancock Life Insurance after foreclosure. 

.Market Opportunity
Although fairly new and attractive, the building was only 25 % leased after severe mismanagement by a former owner.  As a result, the lender foreclosed, providing an opportunity for CCGL’s predecessor company to acquire it at favorable pricing.

.Acquisition
To alleviate the lease-up risk, CCGL’s predecessor company bid only $87 per square foot, leaving sufficient room to undercut the market to achieve lease-up, if necessary.  During pre-closing, CCGL’s predecessor company located a tenant who leased 19 % of the building on an arm’s length basis and became a 25 % equity partner.  As a result, at closing, the building was over 40 % leased and operating at break even.

.Results
The building has undergone an extensive common area renovation and replacement of mechanical systems.  It operated at 100 % occupancy for a number of years.  In 2008, it was partially re-tenanted at premium rents, after rollover of several initial leases.  It is again substantially fully leased.  The building was refinanced within two years of acquisition with a long-term, fixed-rate mortgage, which produced excess proceeds sufficient to completely repay the invested equity. 

CCGL affiliates own a 25% interest in the property, of which CREF I owns 19.5 %.  The remaining 80.5% of CCGL’s interest in the property is owned by another CCGL affiliate.  The remaining 75% of the equity is owned by two professional real estate investors and the tenant partner, all of whom were secured by CCGL.  CREF I’s interest was financed by redeploying proceeds from the refinancing of another portfolio property.  Projected effective annual internal rate of return to the CREF I investors is 25.4%, net after all fees and carried interest to CCGL and its affiliates.

CCGL frequently receives unsolicited offers to purchase the property.  However, CCGL views it as a core holding and does not plan to sell it in the foreseeable future.