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U.S. Century Bank Flips To Profit As Investor Recapitalization Awaits

by Brian Bandell (Senior Reporter, South Florida Business Journal)
May 2, 2013, 12:13pm EDT

U.S. Century Bank made a surprising return to profitability in the first quarter as it moved closer to a deal to recapitalize the bank with new investors.

The Doral-based bank remained “undercapitalized,” but it recently signed an agreement from an investor group led by Jimmy Tate and Sergio Rok that would inject $50 million in capital into the bank and purchase most of its problem loans for $90 million. The deal still needs approval from both shareholders and regulators, including U.S. Department of Treasury officials that must decide whether to grant U.S. Century Bank a large discount towards repaying the $50.2 million in taxpayer funds in accepted from the Troubled Asset Relief Program (TARP).

U.S. Century Bank turned a profit in the first quarter after taking a recovery from a previously charged off loan. MARK FREERKS

U.S. Century Bank turned a profit in the first quarter after taking a recovery from a previously charged off loan.

MARK FREERKS

As of March 31, U.S. Century Bank missed 13 consecutive TARP dividend payments for a combined $8.9 million.

The bank’s performance in the first quarter certainly bought more time for the deal to be considered. U.S. Century Bank earned $129,000, compared to a loss of $1.94 million in the fourth quarter. It had $50.6 million in Tier 1 capital, almost the same amount of money it received from TARP.

The improved results occurred despite its net interest income declining to $7.8 million, from $9.1 million in the fourth quarter.

Two main factors helped the bank make it into the black. It reduced its non-interest expenses, such as operating costs, by $1.8 million to $10.5 million during the first quarter, although it still exceeded its net interest income. Its employee count declined by eight, coming in at 252 on March 31.

The other factor was a recovery from the disposal of a problem loan at above its book value. U.S. Century Bank enjoyed a recovery of $1.26 million on a loan balance that was previously charged off. The same amount was withdrawn from its fund to reserve for future loan losses and counted as profit for the bank. Without this, the bank would have lost money in the quarter.

U.S. Century Bank saw an improvement in asset quality in the first quarter, although it remained poor compared to most banks. It had $94.9 million in noncurrent loans, or 12.38 percent of total loans, and $21.6 million in repossessed property on March 31. That’s down from $98.8 million in noncurrent loans, or 12.53 percent, and $25.5 million in repossessed property on Dec. 31.

The bank sold $5 million in noncurrent loans during the first quarter, but another $4.1 million were recognized.

It held $26.7 million in reserve for future loan losses on March 31 to cover 28 percent of its noncurrent loans. Most banks keep a coverage ratio above 50 percent to give them better protection from bad loan charges.

In addition to its noncurrent loans, U.S. Century Bank had $12.9 million in loans past due by 30 to 89 days on March 31, down from $31.4 million on Dec. 31.

The bank was busy modifying previously troubled loans. It had $36.4 million in loans that underwent “troubled debt restructuring” and were current on payments on March 31, up from $24.5 million on Dec. 31. Most of that is commercial real estate.

The amount of non-performing loans at U.S. Century Bank raises a question about the deal with the Tate and Rok group. They’ve offered to pay $90 million for the bank's problem loans, but U.S. Century Bank still has considerably more non-performing loans than that on its books. Selling those loans at that price would cause the bank to write off the difference as a loss, which would offset the capital from the new investors. However, if U.S. Century Bank can sell off or otherwise reduce its amount of non-performing loans before the deal closes, that could solve the problem.

U.S. Century Bank was the 13th-largest bank based in South Florida on Dec. 31 with $1.01 billion in assets. By March 31, it was down to $950 million in assets.

It finished the first quarter with $878 million in deposits and $740 million in loans, down from $939 million in deposits and $762 million in loans at the end of the year.

U.S. Century Bank Signs Agreement To Be Recapitalized

by Brian Bandell (Senior Reporter, South Florida Business Journal)
Apr 30, 2013, 11:56am EDT

U.S. Century Bank has signed a formal agreement to become recapitalized with a group led by real estate investors Jimmy Tate and Sergio Rok.

The group signed a letter of intent with the Doral-based bank in February. They now have a formal agreement, according to sources familiar with the situation. The details of the agreement weren’t immediately available, but they were said to be similar to the original terms: $50 million in capital from new shareholders and $90 million to buy all of the bank’s problem loans and move them to another entity.

U.S. Century Bank has an agreement to be recapitalized. MARK FREERKS

U.S. Century Bank has an agreement to be recapitalized.

MARK FREERKS

“This group of successful business leaders has a proven track record of dedication to our community,” U.S. Century Bank President and CEO Carlos J. Dávila stated in a news release. “They want to invest in U.S. Century Bank so that it can continue to operate and expand as a first class community-based bank, and they are eager to build upon its family-oriented, service-first environment."

The deal would still require the approval of U.S. Century Bank shareholders and regulators, including officials at the U.S. Department of the Treasury. The bank accepted $50.2 million in taxpayer funds from the Troubled Asset Relief Program and as of March 31 it missed 13 consecutive dividend payments for a combined $8.9 million.

Without TARP, U.S. Century Bank likely would have failed.

Repaying part of TARP is likely in the investors' plans, but the exact amount, including whether the missed dividends must be repaid, is subject to negotiations with the Treasury. The investors hope to close the deal in the fourth quarter.

U.S. Century Bank was “undercapitalized” on Dec. 31 after years of losses related mostly to construction loans made during the real estate boom. However, the $1.01 billion-asset bank with 24 branches is seen by Tate, Rok and their fellow investors as an attractive platform for a community bank with local owners.

Condo developer Jorge Pérez, Miami Dolphins owner Stephen Ross, auto dealership owner Alan Potamkin, Southern Wine & Spirits President Wayne Chaplin, Perry Ellis top executives George Feldenkreis and Oscar Feldenkreis, real estate developers Scott Robins and Gerald Robins, Philip Levine, of Royal Media Partners, FMS Bonds owners Paul Feinsilver and Jimmy Klotz, and Jackson Health System CEO Carlos Migoya are among the investors in the Tate/Rok group.

Tate, Rok and Migoya would join the bank's board of directors.

The existing shareholders of U.S. Century Bank would maintain a minority interest. It has yet to be disclosed how much.

Some minority shareholders of the bank have several pending lawsuits against the bank’s current and former officers and directors over allegations of mismanaging the bank and profiting off of an excessive number of insider transactions.

Another issue for the investor group is the pending fine that regulators are preparing against U.S. Century Bank over violations of the Bank Secrecy Act, as disclosed in the bank’s shareholder communications.

In a joint statement, Tate and Rok said, “We recognize that U.S. Century Bank has a prominent presence in South Florida and an important reputation for being a good corporate citizen.All of the business leaders involved in this transaction are passionate about turning around this community bank and we are ultimately investing in the future of our community, our businesses and our families."

This is the third serious offer to acquire control of U.S. Century Bank in the last two years. Former Terremark Worldwide CEO Manuel D. Medina had a letter of intent to invest $200 million in the bank in late 2011 and St. Petersburg-based C1 Bank had an agreement to acquire it and recapitalized it with $100 million in 2012 but both deals fell through.

Treasury was ready to allow C1 Bank to pay off only $6.27 million of U.S. Century Bank’s $50.2 million in TARP, but that deal was a whole bank acquisition, where a TARP repayment is required. TARP doesn't have to be repaid when a bank raises capital. In the new deal, it’s not clear if the investors would see to repay TARP or have it converted to a different type of stock at a discount.

Officials with U.S. Century Bank couldn’t be reached for comment on the new deal.

Overhaul Is In The Works For Miami’s Famed Flagler Street

by Oscar Pedro Musibay
Apr 3, 2013, 2:02pm EDT

Macy's department store in downtown Miami would likely benefit from an overhaul of Flagler Street.

Macy's department store in downtown Miami would likely benefit from an overhaul of Flagler Street.

The Related Group's interest in turning part of South Miami Avenue in the Brickell area into a pedestrian mall is an idea Miami stakeholders and officials want for part of Flagler Street.

Whether that would involve closing part of Flagler Street for festivals and at select times on the weekends is still undecided.

"We haven't reached that level of consensus from the retailers and property owners," said Javier Betancourt, deputy director of Miami Downtown Development Authority, which helped create the master plan that includes the Flagler Street improvements. Business and property owners, like Sergio Rok, and city officials make up the membership of the Miami DDA, which uses taxes on area businesses to fund various programs, including the creation of plans and downtown improvement projects.

Betancourt said street closures might be done on a trial basis down the road using temporary barriers to get feedback from stakeholders and residents.

What we do know today is that the city of Miami has applied for between $10 and 15 million from Miami-Dade County to widen sidewalks and fix the area’s utilities and drainage between Southwest Second and Southeast Second avenues. That could make all the difference to big brand retailers like Macy’s, which has complained in the past that its store on Flagler Street is ill-served by the neglected roadway. Ideally, widened sidewalks and other improvements would make it possible for restaurants to have more tables on the street and draw new investment into the area.

Betancourt said Flagler Street is particularly hamstrung today by infrastructure-related issues like the location of underground utilities, which has resulted in big gaps between new tree plantings on the sidewalk.

"The idea is to do a complete reconstruction of the street," he explained. "We are going to fix everything including utility and drainage issues below-ground, which then allows a lot of the above-ground stuff to happen."

The Miami DDA has been working on the same vision for South Miami Avenue for some time, with a master plan that lays out details including wider sidewalks, tree plantings and the like.

Related’s Jorge Pérez told the Business Journal he had suggested to the city to stop car traffic along South Miami Avenue from Eighth to 13th Streets to make it more like Lincoln Road on Miami Beach. Lincoln Road is a huge draw for tourists and a hub for restaurants and other retail year round.

If the Brickell street closure were to go forward, even on a temporary basis, Related’s SLS Brickell condo-hotel project planned on South Miami could benefit, as might Swire Property’s Brickell CityCentre. That project has the avenue as a main thoroughfare through its expansive development of offices, residences, hotel suites, retail and other commercial now under construction.

The Related Group wants to turn South Miami Avenue, which fronts its planned SLS Brickell condo-hotel project, into a pedestrian mall.

The Related Group wants to turn South Miami Avenue, which fronts its planned SLS Brickell condo-hotel project, into a pedestrian mall.

Neisen Kasdin, co-chair of the Miami DDA and office managing shareholder of Akerman Senterfitt Miami, said there might be benefits to closing off streets on South Miami Avenue, but the same benefit might be achieved without stopping car traffic. Kasdin, who helped Lincoln Road rise to prominence during his tenure as Miami Beach mayor, said some stakeholders in the Brickell area might be opposed to street closures, temporary or otherwise, over concerns that it would limit access to area properties. It would also require ubiquitous parking to make pedestrian access convenient.

Alice Bravo, assistant city manager and chief of infrastructure, said the city is open to considering the South Miami Avenue pedestrian mall, but has received no direction from city officials to begin vetting it. The designs for the Flagler Street improvements are nearly done, but more work has to be done. A big step in the process would be getting money from the county to help fund the Flagler project, she said.

Investing In U.S. Century Bank In Miami More Like A Family Affair

By Ina Paiva Cordle
Sun, Mar. 17, 2013

Miami may be a major metropolis, but in certain circles, all it takes to raise the capital to buy a $1 billion bank is one degree of separation.

When longtime friends and scions of South Florida family businesses, Jimmy Tate and Sergio Rok, dreamed of recapitalizing ailing U.S. Century Bank, they drew up a list of Miami’s most successful, deeply rooted business leaders and ran the names by their investment partner — real estate magnate Jorge Perez.

The result: a group of investors that feels more like a friends and family plan.

There are school buddies and relatives. Business partners and neighbors. Some have shared ski trips or stayed at each other’s vacation homes.

One is even dating another’s ex-wife.

The investors bring together Hispanic and Jewish families of Miami — entrepreneurs and business owners spanning a variety of industries.

‘A CONNECTION’

“There is a connection for all of us, and we all truly respect one another,” said Rok, 51. “It’s a strong group that can really help take this bank to the next level. So that is why we hand-selected this group. They are all community leaders in their own right, in their own industry, and very successful, and that is important.”

In addition to Tate, president and chief executive of Tate Capital — and brother Kenny Tate, co-owner of Tate Capital — Rok, president of Rok Enterprises, and Perez, chairman and chief executive of the Related Group, the investors include:

Stephen Ross, owner of the Dolphins and Perez’s business partner.

Wayne Chaplin, president of Southern Wine & Spirits, who has played golf with Rok and who Perez knows well. Chaplin and Tate are on the Mt. Sinai Medical Center Board of Trustees.

Real estate developer Scott Robins and his father Gerald. Scott Robins and Tate have been close friends since Miami Beach High School and belonged to the same fraternity, TEP, at the University of Florida. Their families used to take annual ski trips together to Steamboat Springs, Colo.

“I have a lot of faith and confidence in the individuals putting this deal together,” said Scott Robins, 49. “And for me, it was really about diversification [of investments].”

George Feldenkreis and his son Oscar, chairman/chief executive and president, respectively, of Perry Ellis International. Oscar Feldenkreis used to live on Tate’s street in North Miami’s Keystone Point, and his children are friends with Tate’s. Oscar Feldenkreis, Rok, Tate and Scott Robins also have welcomed the New Year together at Rok’s family’s home in Islamorada, and Rok’s sister and brother-in-law are best friends with Oscar Feldenkreis and his wife.

Alan Potamkin, co-chairman of the Potamkin Companies, whose life partner, Brigitt Rok, is Sergio Rok’s ex-wife. Potamkin met Sergio Rok through her, and Tate, through Rok and family events and parties. Potamkin has also known Perez for 25 years. They are members of a Young President’s Organization forum of eight, who meet monthly.

Former ambassador and investor Paul Cejas, who has shared investments with Rok’s father.

Philip Levine, founder of Royal Media Partners, who has invested in real estate with Scott Robins. Levine is running for mayor of Miami Beach.

Paul Feinsilver and business partner Jimmy Klotz, owners of FMS Bonds. Feinsilver and Tate live three houses away from each other and go out to lunch by boat every Saturday. Feinsilver has invested in other Tate deals.

“Jimmy [Tate] is one of my closest friends,” Feinsilver said. “But more than that, we’ve done a lot of business together, and that says a lot, when you can maintain a good friendship and do business together.”

Carlos Migoya, a former banker and current chief executive of Jackson Health System, who Tate has known for many years. Migoya has stayed at Tate’s home in North Carolina. Potamkin also knows Migoya since the late 1970s, when Migoya was the general manager of a car dealership that competed with Potamkin’s.

“There was no prospectus. Sergio, Jorge and I sat in a room and saw who would be best to raise this bank,” said Tate, 49. “They’re all forward thinking, successful business leaders who have the same passion as we do about saving a community bank.”

U.S. Century last month signed off on a letter of intent, in which the group will pump $50 million in capital into the bank, becoming majority owners. In addition, the group will pay about $90 million to buy certain loans, including all $98 million of U.S. Century’s non-performing loans. The deal will also provide for a negotiated amount of more than $5 million to be paid to the federal government for U.S. Century’s $50.2 million in TARP funds, said U.S. Century President and Chief Executive Carlos J. Dávila.

While Tate, Rok and Perez will have the largest investments, no one will have a majority ownership, Tate said. He, Rok and Migoya will serve on the bank’s board.

“You go through the names and they are deeply rooted families from Miami, and a really good combination between the Hispanic and the Anglo-Jewish community,” Perez said.

LINKS, SIMILARITIES

A key: Such a group shares a level of comfort and trust, said Jerry Haar, Florida International University professor, associate dean of the College of Business and director of FIU’s Pino Entrepreneurship Center.

“They bring intangibles to the deal, intangibles that are often far more important than the money: a shared view of the world, a shared view of business, similarities and connections,” Haar said.

U.S. Century, a Hispanic-oriented bank that opened in 2002, has been operating under a regulatory consent order since June 2011, which has mandated that it raise capital, among other issues.

Under the deal, U.S. Century’s 441 existing shareholders will remain as stockholders of the bank, which has $1 billion in assets and 24 branches, though their percentage of ownership will shrink.

After agreeing to the list of investors, Tate and Rok met with each individually, inviting them to bring their capital and expertise to help resuscitate the ailing community bank.

Tate and Rok have already gone to Washington, D.C., Atlanta and Tallahassee, to meet with all the necessary banking regulators. The investors are now conducting due diligence, and hope to have a definitive agreement by the end of March. Pending shareholder and regulatory approvals, the deal could close this summer.

“They are all quality, philanthropic business people,” said Potamkin, “who feel that a strong community bank should continue to exist in Miami-Dade County, owned locally.”

South Florida RE Titans Push Into Banking

Jimmy Tate, Sergio Rok and Jorge Perez

Jimmy Tate, Sergio Rok and Jorge Perez

Three of South Florida’s biggest real estate hotshots, Jimmy Tate, Sergio Rok and Jorge Perez, are considering moving into the banking business. According to the South Florida Business Journal, the group is looking into purchasing  U.S. Century Bank, which they are calling “undercapitalized.”

Whether the deal closes or not should be announced in the coming days, as the group completes its due diligence phase. The bank’s board has already approved the proposed deal.

The group of developers are known for their ability to turn around distressed real estate, such as selling off debt at the Omni Center in Downtown Miami for a profit of more than $50 million and converting  Everglades Lumber into a Walmart Neighborhood store. However, it is yet to be seen if the group can turn around a bank.

Real estate developer Sergio Rok talks football and winning

by Oscar Pedro Musibay
Nov 23, 2012, 6:00am EST

The giant ring on Sergio Rok’s hand is impressive. It looks like a NFL super bowl ring, many times the size of a normal man’s knuckle. The resemblance is no coincidence.

The real estate investor and developer, who with his partners sold the Omni Center debt for a $50 million profit, was inducted in 2012 into the Florida Flag Football Hall of Fame.

Sergio Rok with Norm McLean, commissioner of the Florida Flag Football League. Rok has been an avid player of the game for years.

Sergio Rok with Norm McLean, commissioner of the Florida Flag Football League. Rok has been an avid player of the game for years.

Rok, 50, is known more for his real estate prowess.

His family company Rok Enterprises, which included his father Natan Rok until his death several years ago, has banked a large portfolio of property in Miami’s central business district during more than two decades of investment. The company currently owns 26 commercial and retail properties in Miami Dade County totaling 1.5 million square feet of space, with 17 of them located in Miami’s Central Business District. The portfolio of property makes Rok Enterprises the largest commercial retail landlord in downtown Miami.

Rok is not only the second-generation president of Rok Enterprises, but his 25 years of real estate experience is combined with banking entrepreneurship. In 2006, he sold TransAtlantic Bank for $175 million to Banco Sabadell.

Rok is an expert at workouts on distressed assets, which increased in volume and variety during the downturn.

He is a partner with Jimmy Tate of Tate Capital in an opportunistic fund, a partnership that often includes The Related Group, which buys the debt on distressed assets.

In 2012, the partners closed on about 10 purchases, and in the last three years has bought more than 15 assets with a market value of more than $600 million.

In 2012, Rok and his partners signed a deal to bring the first Walmart Neighborhood Market to Miami at the former site of Everglades Lumber.

But Rok, a father of two, still fits into his schedule plenty of flag football games and plays in tournaments around the state and the country.

He spoke to the Business Journal about this passion and his 2012 induction with eight of his peers. The league website, which has been hosting championships going back more than four decades, identifies him as ‘Sergio Rok, Legendary Coach & Player.’

Distressed debt is big business in commercial real estate

By Elaine Walker
MCCLATCHY NEWSPAPERS

MIAMI — If there were an award for the most profitable single distressed commercial real estate debt purchase, Miami’s Omni Center would be a contender.

Local real estate investors Jorge Perez, Jimmy Tate and Sergio Rok looked at the Omni Center, a struggling mixed-use project, and saw a great redevelopment opportunity. When they purchased the $161 million note in May that represented the bulk of the $206 million mortgage, their vision called for first gaining control of the property through foreclosure and eventually embarking on a mixed-use redevelopment plan. Selling wasn’t in the cards.

What they never expected was the Genting Group coming along four months later and buying them out at the full value of the note, with plans to incorporate the Omni as part of Resorts World Miami. The Perez-led group walked away with a $61 million profit in four months.

“We didn’t openly go out shopping that deal to sell it,” said Matt Allen, chief operating officer for Perez’s Related Group. “First and foremost, we’re developers. The Omni site is one that we would have loved to develop. But it’s not a bad amount of money we made in four months.”

But before you think this is the new way to get rich quick, the Omni story is by far the exception rather than the norm. While purchasing distressed commercial real estate debt and distressed properties is gaining in popularity, those involved say it’s not a game for the inexperienced investor.

“Buying distressed debt is a very risky business,” said Ezra Katz, chief executive of Aztec Group, a Miami investment bank group that has also been purchasing debt. “A lot of people don’t understand the details. They smell a bargain and they take a risk. Unless you really know what you’re doing, stay out. If you want to gamble, you might as well go to Las Vegas.”

While most investors are purchasing debt as a way to gain control of a piece of real estate, it is no guarantee. The debt buyer could remain the lender. Gaining control of an asset requires foreclosure, which can be a costly and lengthy process.

Perez’s Related Group, as well as Tate and Rok, are among some of the bigger South Florida players in the distressed debt market. Other major players include Lennar’s Rialto Investments, LNR Property and Ram Realty Services of Palm Beach Gardens. Most are typically buying a mix of distressed debt, as well as distressed assets. Investments span all the asset classes from retail to multi-family apartments, office and hospitality.

The key is identifying quality assets that are underwater because they were overleveraged during the boom, rather than underlying flaws in the real estate.

While there are many institutional buyers, many bigger players are larger real estate organizations with the ability and manpower to quickly evaluate the potential deals. Buyers must also have the cash to fund a deal. While it’s possible to refinance some of the debt later, closings tend to require quick turnarounds. Properties often need an additional capital infusion.

“To be competitive in this business, you’ve got to have ready capital available,” said Jim Stine, chief investment officer of Ram Realty Services. “Most of these properties need some work. The borrowers have probably been in default for a year or more. They’re not investing in the property and they’re not caring for them.”

Most recently, Ram closed on a $27 million note for a Plantation, Fla., shopping center anchored by Publix and Steinmart. In the past two and a half years, Ram has acquired 58 distressed real estate notes with a total debt value of approximately $275 million. For each property, the company paid between 20 percent and 80 percent of face value. Ram has recently formed its third investment fund that will target about $500 million of additional distressed note acquisitions, as well as other investments.

Stine and others in the industry see no signs of the deal flow slowing anytime soon.

At the end of the third quarter of 2010, approximately $3.2 trillion of outstanding debt was associated with commercial real estate, according to the Federal Reserve.

Since most of the debt was financed during the boom years, the cycle could take as much as five to six more years to completely play out. There is an estimated $361 billion in commercial real estate debt expiring in 2012, and $1.4 trillion expiring between 2012 and 2015, based on a report from Deloitte.

Real Capital Analytics estimates the outstanding commercial real estate distress currently at $172.4 billion, including $42.6 billion of properties already taken back by lenders. Real Capital estimates that puts workouts “nudging” the halfway mark.

“The market has really exploded since 2009,” said attorney Jon Chassen, chair of Bilzin Sumberg’s distressed property group. “It’s created its own industry.”

Miami Beach’s LNR Property is on the front lines of the deal flow, as the country’s largest special servicer of troubled commercial mortgages. Earlier this year LNR started a program with www.auction.com as a way to sell both distressed debt and properties.

“It’s a very efficient way for us to realize a market and value for properties,” said David Levin, vice chairman of investor relations for LNR, which is also purchasing debt.

“An auction format shines a bright light on the process and the property. Anyone can bid. We’re getting more and better responses, everyone from Johnqhotmail.com to Goldman Sachs. It’s very diverse.”

Transactions have increased as banks are more willing to mark their assets to market value, instead of continuing what the industry had dubbed the game of “extend and pretend.” That refers to what has been the tendency in recent years by lenders to extend the term of a loan to avoid writing down the value of the asset, which could have seen dramatic declines post recession.

Camilo Miguel Jr., chief executive of Mast Capital, a Miami Beach private equity firm that has partnered with the Related Group, said the number of debt purchases his company has made this year is more than double the past two years put together.

“We had been a little apprehensive about making acquisitions in the past, as fundamentals were not supportive of the inflated pricing, but have started to dip our toe in,” Miguel said. “At this point in the cycle, it’s starting to make more sense. Banks are selling some of the more desirable assets. We think that momentum is going to continue through the end of the year and next.”