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Ram/Square Mile JV Is an Instant Force in Smallish SE Strip Malls

September 08, 2010

Chances are investors, leasing agents, merchants and other parties involved in Southeast strip malls are going to be hearing the name Ram a lot more in coming months.

Many retail (especially), mixed-use and multifamily pros in Florida and North Carolina are already familiar with the Ram group of development, operating and investment companies headquartered in Palm Beach Gardens, Fla. But affiliates of the firm headed by father-son team Peter and Casey Cummings will likely be taking title to - and operating - nearly 40 mostly smallish retail centers across the Southeast in coming months.

Tapping into its hands-on operational expertise and its latest investment fund, Ram is partnering with New York-based real estate fund manager Square Mile Capital Management on a portfolio of 38 distressed conduit loans secured by 39 centers in Florida, Tennessee, Georgia and the Carolinas.

The venture acquiring the mortgages from special servicer LNR Partners (and various mortgage-bond trusts it represents) makes for quite the formidable team, as both partners have considerable capital and asset management capabilities.

In something of a non-traditional structure, both are contributing equity on a roughly equal basis to purchase the portfolio, which is secured by properties totaling 1.8 million square feet of gross leasable area. More accurately, they're thought to be buying a couple of sub-portfolios, with combined outstanding principal balances totaling about $155 million, from a giant $1 billion-plus distressed conduit debt portfolio LNR offered through financial advisor Eastdil Secured.

Reports have the overall portfolio's loans trading at an average of 45 cents on the outstanding principal dollar.

In the venture's case, the cash comes from Ram Realty Partners II, a private equity fund sponsored by Ram and its principals, and the Square Mile Partners III fund. Such joint ventures aiming to capitalize on distressed debt portfolio opportunities typically team a partner contributing the vast bulk of the capital with an expert operator overseeing the physical assets.

But in the Ram/Square Mile case, the partners are both contributing capital as well as asset management expertise.

Square Mile's asset managers will look to "resolve" financial issues with borrowers - which in most cases will likely mean enforcing the noteholders' rights to the collateral. And the Ram Realty Services division is the hands-on group charged with on-site management and leasing of the properties as ownership transfers to the investors.

Ram hadn't responded to SmallBalance.com's inquiries about projected yields, leverage strategies, hold periods and other matters by press time.

Martha Peyton, managing director with institutional investment giant TIAA-CREF Global Real Estate, notes that making improvements to struggling strip centers is a favored strategy among opportunistic investors these days. Stabilizing occupancy and "riding cap rates down" as the economy and retail property markets recover constitutes a promising investment program, she adds.

The story of Ram and its predecessors actually dates back decades, and includes the Cummings family's development of Palm City's 2,600-acre former dairy land Martin Downs. Peter remains chairman, while Casey, who has now been with the company for nearly 20 years, has been president for the past decade and also holds the chief investment officer title.

More than half its assets under management are in the retail category. But Ram also pursues multifamily and mixed-use investments and developments, mostly in Florida and nearby states.

Ram's first commingled fund focused on making investments that gave its mostly banking investors credit under the Community Reinvestment Act.

Ram next raised $200 million in limited partner equity commitments in anticipation of making leveraged investments totaling some $600 million. Before the joint investment into the LNR sub-portfolio, Ram's second fund had mostly been making sizable investments into select distressed assets on a one-off basis.

Square Mile is headed by veteran opportunistic investor Jeffrey Citrin. Before founding the firm in 2006, Citrin spent the previous dozen years heading Blackacre Capital Management, the real estate arm of global investment firm Cerberus Capital Management. Another well-known distressed debt disposition veteran, Charlie Toppino, formerly of Eastdil Secured, joined Citrin two years ago.

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