A Richmond real estate investment fund wants to buy the last remaining asset of a bankrupt local biotech firm.
Real Estate Value Advisors and its REVA Catalyst Fund have made a $4.22 million bid for the former headquarters of Commonwealth Biotechnologies, which is not a functioning company apart from its real estate holdings.
The property is a 32,000-square-foot laboratory facility at 601 Biotech Drive, just off Midlothian Turnpike. It has been on the market for a couple of years. The lab sits on 4.5 acres and was most recently listed at $5.7 million. It was originally listed about two years ago at $6.43 million.
But this is not a normal transaction, and it’s not even close to being a done deal.
Because Commonwealth Biotech filed for Chapter 11 bankruptcy protection in January, the Real Estate Value Advisors is considered the stalking horse bidder for a court-ordered auction of the property next month. Its bid will be the benchmark for other parties that might take a crack at buying the space at auction.
And there are some hurdles the buyer has to deal with.
According to Steve Sadler, who runs Real Estate Value Advisors and who is managing director of the REVA Catalyst Fund, getting financing for a deal like this is tricky.
“Whether we stay in or pull out depends on whether we can get financing at a reasonable structure,” said Sadler. “That’s been a real challenge.”
The fund is a private placement fund that was launched in 2009 and is open only to accredited investors. It invests in real estate that it believes has ownership problems, according to Sadler.
“We acquire turnaround opportunity properties,” Sadler said. “There are a lot of problem properties that need some love.”
Commonwealth Biotech fits that description.
The company was founded in 1992 and went public in 1997. After years of losses, it decided become a debt-free, publicly traded shell company that could then be combined with another company looking to go public through a reverse merger – a cheaper and faster way of going public than an IPO.
The Biotech Drive property has been a point of contention recently between Commonwealth Biotech and its largest shareholder and former chairman.
The company in recent months ousted its chairman after he tried to organize shareholders to slow down and rethink the unwinding process. In particular, former chairman Bill Guo wanted to stop the sale of the Biotech Drive property, refinance the mortgage on the building and hold it until the market turned around. Guo’s plan failed.
“They have a lot of baggage that they’re trying to clean up and get out from under,” Sadler said of Commonwealth Biotech.
Although the REVA fund plans to put in a substantial chunk of cash for the deal, it was planning on financing a portion of the purchase.
“Banks are still not lending, despite Ben Bernanke tells you,” Sadler said. “There is little to no appetite for [commercial] real estate related debt.”
The first lien holder on the property is BB&T, which Commonwealth Biotech still owes $2.43 million. Sadler said BB&T hasn’t indicated an interest in continuing to be the lender on the property.
“For us, the issue is bringing in another lender that will offer funds on terms that are reasonable,” Sadler said.
In addition to BB&T’s lien on the property, there is about $500,000 worth of liens against it from several New York-based capital firms.
There’s also a lingering question over the tenant in the building.
What makes the Biotech Drive property attractive is its tenant, a company called AIBiotech. It is a division of Innsbrook-based Bostwick Laboratories. Bostwick purchased the AIBiotech assets from Commonwealth Biotech back in 2009.
Although Sadler said he’s confident AIBiotech will stay for at least the three and half years remaining on its lease, Bostwick hasn’t been particularly communicative.
“We’ve had a number of conversations with them about their intents for that actual property,” Sadler said of Bostwick corporate. “They have not been overly forthcoming about their future plans.”
Should the REVA fund’s offer prevail in auction and the deal closes, the Biotech Drive property would be the fund’s second local real estate holding. It owns the Fairfax Building at 10710 Midlothian Turnpike.
The fund has 35 investors, none of whom are local. It has purchased about 2 million square feet of property across the Southeast and in Pennsylvania and Arizona, Sadler said.
CBI is being represented in its bankruptcy by attorneys Lynn Tavenner and Paula Beran of Tavenner & Beran.
Michael Schwartz is a BizSense reporter. Please send news tips to [email protected].
A Richmond real estate investment fund wants to buy the last remaining asset of a bankrupt local biotech firm.
Real Estate Value Advisors and its REVA Catalyst Fund have made a $4.22 million bid for the former headquarters of Commonwealth Biotechnologies, which is not a functioning company apart from its real estate holdings.
The property is a 32,000-square-foot laboratory facility at 601 Biotech Drive, just off Midlothian Turnpike. It has been on the market for a couple of years. The lab sits on 4.5 acres and was most recently listed at $5.7 million. It was originally listed about two years ago at $6.43 million.
But this is not a normal transaction, and it’s not even close to being a done deal.
Because Commonwealth Biotech filed for Chapter 11 bankruptcy protection in January, the Real Estate Value Advisors is considered the stalking horse bidder for a court-ordered auction of the property next month. Its bid will be the benchmark for other parties that might take a crack at buying the space at auction.
And there are some hurdles the buyer has to deal with.
According to Steve Sadler, who runs Real Estate Value Advisors and who is managing director of the REVA Catalyst Fund, getting financing for a deal like this is tricky.
“Whether we stay in or pull out depends on whether we can get financing at a reasonable structure,” said Sadler. “That’s been a real challenge.”
The fund is a private placement fund that was launched in 2009 and is open only to accredited investors. It invests in real estate that it believes has ownership problems, according to Sadler.
“We acquire turnaround opportunity properties,” Sadler said. “There are a lot of problem properties that need some love.”
Commonwealth Biotech fits that description.
The company was founded in 1992 and went public in 1997. After years of losses, it decided become a debt-free, publicly traded shell company that could then be combined with another company looking to go public through a reverse merger – a cheaper and faster way of going public than an IPO.
The Biotech Drive property has been a point of contention recently between Commonwealth Biotech and its largest shareholder and former chairman.
The company in recent months ousted its chairman after he tried to organize shareholders to slow down and rethink the unwinding process. In particular, former chairman Bill Guo wanted to stop the sale of the Biotech Drive property, refinance the mortgage on the building and hold it until the market turned around. Guo’s plan failed.
“They have a lot of baggage that they’re trying to clean up and get out from under,” Sadler said of Commonwealth Biotech.
Although the REVA fund plans to put in a substantial chunk of cash for the deal, it was planning on financing a portion of the purchase.
“Banks are still not lending, despite Ben Bernanke tells you,” Sadler said. “There is little to no appetite for [commercial] real estate related debt.”
The first lien holder on the property is BB&T, which Commonwealth Biotech still owes $2.43 million. Sadler said BB&T hasn’t indicated an interest in continuing to be the lender on the property.
“For us, the issue is bringing in another lender that will offer funds on terms that are reasonable,” Sadler said.
In addition to BB&T’s lien on the property, there is about $500,000 worth of liens against it from several New York-based capital firms.
There’s also a lingering question over the tenant in the building.
What makes the Biotech Drive property attractive is its tenant, a company called AIBiotech. It is a division of Innsbrook-based Bostwick Laboratories. Bostwick purchased the AIBiotech assets from Commonwealth Biotech back in 2009.
Although Sadler said he’s confident AIBiotech will stay for at least the three and half years remaining on its lease, Bostwick hasn’t been particularly communicative.
“We’ve had a number of conversations with them about their intents for that actual property,” Sadler said of Bostwick corporate. “They have not been overly forthcoming about their future plans.”
Should the REVA fund’s offer prevail in auction and the deal closes, the Biotech Drive property would be the fund’s second local real estate holding. It owns the Fairfax Building at 10710 Midlothian Turnpike.
The fund has 35 investors, none of whom are local. It has purchased about 2 million square feet of property across the Southeast and in Pennsylvania and Arizona, Sadler said.
CBI is being represented in its bankruptcy by attorneys Lynn Tavenner and Paula Beran of Tavenner & Beran.
Michael Schwartz is a BizSense reporter. Please send news tips to [email protected].