2 OVERHILL ROAD, Scarsdale, NY


2 Overhill Road is a 62,000 square foot office building with garage parking for 200 cars located in the Village of Scarsdale, NY.  It is the only office building with garage parking in the Village, one of the premier residential areas of Westchester County.  The property was purchased for $4.7 million in a complicated bankruptcy acquisition in November 1999.  Total project cost was $14.0 million.  The building has recently been appraised at $24.6 million.

.Market Opportunity
Built in 1954, the building was occupied at premium rents for many years.  However, after a period of neglect, occupancy dropped to 25%, the parking garage was condemned for lack of maintenance and a mortgage default resulted in bankruptcy, which often provides the opportunity to acquire well-located assets at discounted pricing.

.Acquisition
In 1998, a CCGL affiliate acquired a defaulted loan created in prior tax shelter syndication at a dramatically discounted price.  Ownership of this debt allowed the CCGL affiliate to control the bankruptcy, which it initiated.  A year later, the affiliate and two partners purchased the first mortgage at a $2.0 million discount, substantially discharged the debtor’s obligations and obtained full ownership of the property.  They then placed a construction loan on the property to fund the cost of the planned extensive renovation.

.Results
A gut renovation in 2000 returned the property to Class A standards.  The building since has been fully leased at premium rents.  The property has been refinanced twice, returning the investors’ entire equity, while leaving them with significant cash flow.  Additional improvements to the exterior of the building were completed in 2008.

CREF I and an affiliate own a 50% interest in the property.  The remainder of the equity is owned by two professional real estate investors secured by CCGL.  The projected effective annual internal rate of return to CREF I investors is 18.2%, 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.