Aries Capital Creates Asset Management Division for Distressed Condos
- Sep 08, 2010
Chicago–On the heels of concluding a $3.2 million deal through Aries Capital Real Estate Fund (AREF) that oversaw the completion and sale of all units within the Atwood Condominiums of Chicago, Aries Capital has launched a new division of the firm, Aries Asset Management Services. The move, according to the company, is timed to take advantage of the current state of the condo market in Chicago and elsewhere.
“Nearly 300 banks have closed in the past two years,” Neil Freeman, chairman and CEO of Chicago-based Aries Capital, tells MHN. “Institutions are re-valuing their assets lower and don’t have the expertise to work the assets to create value. As a result, this is the best time in several decades to be in asset management business.”
The Atwood Condominiums is a 12-unit property in the Andersonville neighborhood on the North Side of Chicago. Led by Andrew R. Wilson, vice president of Aries Capital, the Atwood project began in November 2009, when the firm accepted a deed-in-lieu of foreclosure on the vacant property.
According to Freeman, he and Wilson recognized the challenges the lender faced as an opportunity for AREF to provide project management and additional capital for completion of the development. As project manager, AREF negotiated new financing to complete the condo development, re-permitted and re-drew the project, and secured the necessary approvals from the City of Chicago and the local alderman. AREF then secured the site and hired an outsourced construction and marketing team to complete it.
“The lender held a $1.8 million note on the unfinished property and required additional funding to complete the renovation, a headache for a financial services company,” notes Wilson. “Still, the development was successfully completed, amenities were upgraded from the original plans, and the lender was paid in full, including accrued interest. We also managed to secure FHA financing to enable buyers to purchase units for only 3.5 percent down.”
The new Aries Asset Management Services will likewise offer distressed property services to qualified lenders and borrowers, says Wilson. The firm will address a niche created by widespread defaults in the commercial real estate lending market, as was the case with the Atwood Condominiums.
Many lenders are now landlords by default, Wilson explains. The Atwood Condominiums project, though successful, represented an unconventional arrangement for AREF, which typically provides mezzanine loans on commercial real estate, not distressed properties. For the new division, however, such an arrangement will not be unconventional, but rather its bread and better.