Three Coconut Creek properties involved in possible securities fraud…
Three commercial buildings in Coconut Creek, Florida… all purchased in 2008 by Principal Life Insurance Company for the Principal U.S. Property Separate Account, a 401k retirement separate account, had been bundled in commercial mortgage backed securities prior to the time of purchase. Managed by Principal Real Estate Investors of Des Moines, Iowa, all three properties had mortgage loans and were registered as foreign Llc’s in Florida on November 13, 2007.
6810 Lyons Technology Circle was purchased from Lakeside @ Lyons LTD on 04/07/2008. The 39,456-square-foot office building at 6820 Lyons Technology Circle was developed in 2006 by Malcolm Butters and sold for $9.3 million in 2008 to Principal Life Insurance for the Principal U.S. Property Separate Account. A Loan Assumption Agreement was included in the purchase, a $5.8 million mortgage through Wells Fargo Bank. The property was bundled in a commercial mortgage backed securities fund originally issued by Wachovia Bank Commercial Mortgage Trust, WBCMT 2006-C27. The property was sold in 2011 in a foreclosure action for $4.3 million. The loan had $5.7 million outstanding and was more than 90 days past due:
6855 Lyons Technology Circle was purchased from Lyons Tech VI LTD for $4,403,000, also on 04/07/2008. The property was renamed 6855 Lyons Technology Circle Holdings, LLC on 3/4/2010, listing the managing member as Bank of America, N.A., as Trustee for the registered holders of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, WBCMT Series 2007-C30. The property was later sold in a foreclosure for $2.8 million to Lyons Flex Space llc due to a defaulted mortgage with Wells Fargo Bank.
4701 Johnson Road, Coconut Creek, Florida…
In 2002, a Florida developer obtained a mortgage loan for $2,750,000 from Principal Life Insurance Company. The borrower was Lyons Tech I, LLC., of Coconut Creek, Florida. In 2003, Principal Life, as the Original Lender, transferred it’s interest in the note to LaSalle bank, as Trustee for BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES TRUST 2003-TOP 10. The Secured Party effective 12/13/2002 is LaSalle Bank National Association, as trustee for the benefit of the Holders of Bear Sterns Commercial.
On November 13, 2007, Principal completed an Application By Foreign Limited Liability Company For Authorization To Transact Business in Florida. The application clearly names the foreign limited liability company as 4701 Johnson Road, LLC, with an FEI number 42-0127290. the address shown is Principal’s corporate office at 801 Grand avenue, Des Moines, IA 50392. The same is given as a business address, andthe Member is shown as Principal Life Insurance company, an a Iowa Corporation, for its Principal U.S. Property Separate Account.
Yet, on April 28, 2008, almost 6 months later, that same property was purchased from Lyons Tech I, Llc for $6,770,000. The buyer was Principal Life Insurance Company on behalf of the Principal US Property Separate Account (PUSPSA). On April 23, 2008, a week earlier, a Consent to Transfer and Loan Assumption had been filed in Broward County, Florida; reportedly, the loan was assumed and the property sold to 4701 Johnson Road, LLC as the borrower. The loan assumption amount was $2,466,357.94. Principal Life Insurance Company was the lender.
In 2011, the loan defaulted with Principal Life as the lender and the property was foreclosed upon by LaSalle Bank as trustee for the Bear Stearns CMBS. It was sold the following year. LaSalle’s successor, U.S. Bank National Association, filed a Satisfaction of Renewed, Restated, and Amended Mortgage and Security Agreement dated November 1, 2012, whereas Principal Life was reimbursed the entire mortgage loan proceeds of $2,466,357.94! In the final days, Principal received full reimbursement of their loan, and the 401k investors lost the entire $6,770,000 cash purchase price they paid to the seller. The losers were, once again, the hundreds of thousands of Principal US Property Separate Account holders.
Only in this case, there were other losers as well. The investors that purchased shares of Bear Stearns Commercial Mortgage Securities, series 2003-top10 also lost their entire investment in this commercial property. I am no lawyer, but I do have common sense, a trait Principal seems to be lacking. Principal Life Insurance Company owned the mortgage as the original lender on a loan assumed by the PUSPSA. When the loan defaulted, the Trustee had to obtain the approval of Principal to foreclose on the property, purchased by Principal Life on behalf of the PUSPSA. Principal Life was responsible for making loan payments to the lender, which in this case was to themselves. Because they defaulted by failing to make payments on behalf of the 401k participants on their own loan, the property was foreclosed and sold at auction. These actions (or failures thereof) would be considered Securities Fraud by the Florida Division of Securities, but no action was taken at that time.
While it is difficult to follow, Principal had already taken ownership of the property 6 months earlier, and the PUSPSA would have paid the $6,770,000 to the seller, Principal Life! Then, 6 months later, the loan assumption was added to the deal, and the 401k account forked over another $2,466,357.94 for the loan. Principal Life kept the loan active, and for reasons only known to them, they “recovered” another $2,466,357.94 when the property was foreclosed and sold, for a fraction of the market value! I suspect the loan had already been satisfied before the foreclosure.
The website Arivify describes the 4701 Johnson Road, LLC building as warehousing and distribution, with 474,488 sq/ft of space. The assessed value in 2013 was $2,833,440 according to Broward County records. The property was built in 2003 by Lyons Tech I, llc, by obtaining an original loan from now Wachovia Bank, on 11/26/2001, with a principal amount of $2,700,000. The builder paid $600,000 for the land in 2001.
The Original Loan Documents were later assigned to Principal Life Insurance Company (lender) on 12/12/2002, based on the outstanding principal balance plus an additional advance, bringing the loan balance due under the new obligation to $2,750,000… (see Mortgage & Security Agreement). On April 23, 2008, Principal signed a “Consent to Transfer and Loan Assumption Agreement with LaSalle Bank National Association, as Trustee for the benefit of the holders of Bear Stearns Commercial Mortgage Backed Securities, Inc, etal. This was the same date Principal reported the purchase of the Lyons Tech Center property in their PUSPSA 2008-2009 Annual Report.
The common thread connecting all three of these properties include the fact the seller was a affiliate of Principal Real Estate Investors. Principal Life Insurance Company, as Fiduciary for the Principal U.S. Property Separate Account, defaulted on all three loans, one loan in which Principal Life Insurance Company was actually the lender, intentionally and criminally causing 401k investors to lose millions of dollars. All three properties were bundled with separate Commercial Mortgage Backed Securities. All properties were foreclosed upon by the Trustees of the CMBS. Following their purchase, eviction notices were filed against multiple tenants in all three properties.