Cannon Hill, TriPost Team Up To Target $1.5B In Distressed Offices
Developer Cannon Hill Capital Partners has struck a partnership with a private equity firm to spend $1.5B over the next three years buying distressed office buildings along the Acela corridor.
New York-based Cannon Hill and TriPost Capital Partners announced their new joint venture Monday, targeting direct real estate and buying nonperforming loans tied to office buildings in New York City, Washington, D.C., and Boston. The partners also plan to provide capital to owners to pursue office redevelopments and conversions, according to a release.
“After a steep market decline, liquidity is returning to the office sector, and values are rising again,” Cannon Hill co-founder and CEO Jeff Gronning said in a statement. “We’re optimistic that alongside TriPost, we can deploy our expertise and capital into our growing pipeline of compelling investment opportunities.”
Cannon Hill has a portfolio of more than 35 properties totaling 10M SF, most of which are in New York, D.C. and Boston.
TriPost, led by Brad Carroll and Todd Silverman, is a real estate private equity firm with more than $14B invested since it was founded in 2014. It focuses on long-term partnerships and guidance to real estate operators, developers and asset management companies, particularly with middle-market assets.
The partnership is aimed at deals of more than $50M, Commercial Observer reported. It will also pursue opportunities for office redevelopment or conversion — which Cannon is already dabbling in, converting an office in Virginia into an industrial development, according to the release.
There is $500B of debt on commercial offices scheduled to mature by 2028, according to MSCI, much of which is expected to result in distress transactions. More than 11% of CMBS debt tied to office buildings is delinquent, according to Trepp.
“There is a significant wave of maturing loans on office properties coming due over the next three to four years, many of which are over-leveraged or undercapitalized and will struggle to refinance,” Gronning said in a statement.
But central business district offices have seen their values rise by nearly 5% over the past year, although they are still down 45% since 2020, according to MSCI.
Gronning said that as the office sector recovers, it creates “an opportune time to transact.”
Cannon Hill was founded in 2022 by three former executives of Normandy Real Estate — Gronning, Eric Rubin and Melissa Cosgrove Donohoe — after Normandy was acquired by Columbia Property Trust in 2019.
The company acquired Normandy Real Estate Funds III and IV and the Normandy Opportunity Zone Fund from CXP.
It also acquired Normandy’s stake in a 177K SF New York office building at 799 Broadway, which Columbia and Normandy co-developed in 2019. The office asset sold for $255M last year to New York-based Savanna — 4% less than the $266M of debt tied to the property.
