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First Capital REIT Subsidiaries Declaring Bankruptcy

A number of indirect subsidiaries of First Capital Real Estate Trust, a publicly registered non-traded REIT, have filed for relief under chapter 11 in the United States Bankruptcy Court for the Eastern District of California. The subsidiaries include Township Nine Owner LLC, Capitol Station Holdings LLC, Capitol Station Member LLC, and Capitol Station 65 LLC.

The REIT’s operating partnership, First Capital Real Estate Operating Partnership LP, owns a stake in Township Nine Owner LLC, which through a series of subsidiaries, owns 23 parcels of land in Sacramento, California known as the Township 9 Properties.

The Township 9 Properties are secured by a loan that is currently in default, as previously reported by The DI Wire. According to the lender, the total amount owed was approximately $43.7 million as of May 5, 2017.

First Capital OP previously agreed to sell its interests in the properties to a subsidiary of Presidential Realty Corporation (OTC: PDNLA/PDNLB), a multifamily REIT, in exchange for $32.6 million of its operating partnership units valued at $1.00 each.

The issuance of the units is subject to a hold-back requirement until certain conditions are met, including an appraisal of the ownership interest and a work out of the mortgage debt secured by the underlying property.

First Capital REIT has not yet delivered an updated appraisal to Presidential, and the fair market value of the interest must appraise for at least $85.4 million. The default loan has not been refinanced or extended at this time, and First Capital said that they cannot offer any assurances that the Chapter 11 bankruptcy proceeding will impede the satisfaction of this condition.

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