On January 31, CRE Console’s REO Monitor noted Citigroup Global Market Realty Corporation filed to foreclose on Moody National’s Residence Inn located in Midtown Atlanta.
This TIC sponsored deal was a part of a $440 million, 19 hotel property portfolio Moody National bought from Concord Hospitality Enterprises in September of 2007. Following the Concord Hospitality deal, Moody National sold the Atlanta Residence Inn to 27 TIC investors.
This deal was a perfect example of the issues many TIC investors face, which was discussed in our prior post titled “TIC Ownership: Where is the Door?“, as the decline in commercial real estate values has essentially wiped out all equity in TIC deals which originated at the market peak.
It appears Moody National has found one way out; they have arranged to sell this deal to their newly minted private REIT “Moody National REIT I”. Moody National appears to have convinced the original TIC owners to sell for $2.35 million plus the assumption of the $5 million of existing indebtedness.
This price equated to a 50% discount to the 2007 sale price of $14.9 million. In this case, not only did the TIC equity get wiped out, it appears some of the debt position took a significant hit, too.
In Citigroup’s January foreclosure filing, they noted that the property secured a $10.9 million loan. How over $5 million of indebtedness was extinguished is not apparent, but the new financial structure yields approximately 7.75% under a newly signed operating lease with “Perimeter Master Tenant” for a 25 year term.
After receiving an email from one of the 27 TIC owners, we want to clarify that Citigroup never foreclosed on the property. The sale to Moody National REIT I preempted that process from occurring.