BGK Group acquired by Rosemont Real Estate
BGK Group, the largest holder of commercial real estate in New Mexico with 2 million square feet, has been acquired by New York’s Rosemont Real Estate, a subsidiary of Rosemont Capital LLC.
Rosemont has acquired a 51 percent controlling interest and will rename the company Rosemont Realty LLC, but its headquarters will remain in Santa Fe. Daniel C. Burrell has relocated from New York to become the new CEO, succeeding BGK founder Eddie Gilbert, who turns 88 this year. Also relocating to Santa Fe is Michael E. Mahony as chief operating officer.
The acquisition price was not disclosed.
The deal gives BGK a needed cash and management infusion. BGK lost one property in Milwaukee in 2009 to its lenders, and its profitability dropped last year, according to Robin Smith, vice president of investor relations.
The new structure will allow BGK to reduce mortgage balances and make new acquisitions. Smith said acquisitions later this year are a possibility. Any deals most likely will not be syndicated limited partnerships, but will have institutional backing. Many BGK deals involved 50 to 200 partners for a single building, shopping center or multi-family complex.
“This was not a desperation move, but driven by management, as Eddie Gilbert is nearly 88. The new partnership helps with our succession issue, and the cash infusion was part of it, but we would have continued operating anyway,†Smith said.
There were other companies seeking to buy BGK, Smith added.
BGK’s portfolio includes 12.5 million square feet of commercial office property, 500,000 square feet of retail space and more than 2,000 multi-family units quick pay day loan. The New Mexico holdings include 19 Albuquerque office buildings, six properties in Santa Fe and one in Hobbs. The company will retain its Albuquerque management office.
Gilbert remains a significant shareholder in the new company, and will continue to work in an advisory capacity. There will be no reductions in the Santa Fe headquarters staff, and there are no plans to sell the portfolio off in the foreseeable future. BGK is the first major acquisition Rosemont has made in real estate.
“The BGK-Rosemont partnership enters the market at a time when traditional leaders in commercial property are severely limited by financial distress, mortgage obligations and lack of access to debt or equity financing. This has resulted in an opportunity for Rosemont Realty to benefit from an environment of reduced competition, historically higher cap rates, more conservative capital structures and improved deal terms in the market,†said Burrell.
“Rosemont is a strategic partner that will enable BGK to grow out of its historical reliance on a retail-based model,†Paul Gerwin, formerly with BGK and the new executive vice president of Rosemont Realty, said. “To move toward an equity capital market strategy for the business and put into place more permanent financing structures, Rosemont Capital’s relationships, expertise and track record will be critical.â€
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