N.Y. Firm Takes Writeoffs on 2 Western Deals : Real estate: Projects entered with the Koll Co. of Newport and Ferguson Partners of Irvine have gone sour, says ICM Investment Partners in reporting a 1990 loss of $12.3 million.
A New York real estate investment trust said Tuesday that it has taken large writeoffs and has set aside funds for potential losses for joint investments with two Orange County development firms.
ICM Investment Partners Inc., in reporting a $12.3-million loss for 1990, said it set aside $4.1 million in the fourth quarter for a possible loss related to its investment in University Tower, a 10-story office building in the Market Place commercial complex near UC Irvine. The company said it is an owner of the 200,000-square-foot building in partnership with Ferguson Partners in Irvine.
Earlier in the year, ICM wrote off as a loss a $2.4-million investment in Koll Plaza in Scottsdale, Ariz., a joint venture of ICM and the Koll Co. in Newport Beach. The partnership’s lender recently foreclosed on the property.
ICM’s loss in 1990 underscores a growing concern in the commercial real estate industry over the economic stability of a number of development companies in a generally weak and overbuilt market.
ICM said University Tower, while nearly fully rented, is not generating sufficient cash to make loan payments and that the partnership has defaulted on a $4.1-million acquisition loan from ICM.
John Ferguson, president of Ferguson Partners, expressed surprise at Tuesday’s announcement.
Constance Moore, ICM Investment Partners’ newly elected president, said that both partners had stopped making loan payments in the fourth quarter but that the $4.1-million reserve “is merely an accounting requirement” as negotiations over the terms and conditions of the company’s loan to the joint partnership continue.
But Ferguson said he was not aware of a default.
“To the best of my knowledge, everything is OK,” he said. “This is not a University Tower partnership issue, and I have no idea why they are writing down the loan.”
In the Koll Plaza partnership in Arizona, ICM was the financial partner while Koll provided the construction and development services, according to Koll President Ray Wirta.
He said ICM unilaterally decided to stop making payments to the partnership’s lender in early 1990. Koll typically does not make loan payments, he said, and in this case “we decided it did not fit into our business plan to start making them.”
He described the situation with ICM as “very unusual. . . . This is the first time one of our financial partners has decided that it does not want to continue supporting a property.”
