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San Francisco investor offers $434 million for Marin, Sonoma properties that were part of Ponzi scheme

A San Francisco real estate firm is the key bidder on about five dozen multifamily and commercial properties in Marin and Sonoma counties that are set to be sold next month to settle bankruptcies stemming from the late Ken Casey’s $330 million Ponzi scheme.

The real estate portfolio in play would be the largest number of properties that changed hands in 16 years and the biggest deal since the estimated $400 million sale of the former Fireman’s Fund Insurance campus in Novato at the beginning of this year, according to local real estate sources.

In the past few months, Hamilton Zanze & Associates has emerged as the opening or “stalking horse” bidder for a Bankruptcy Court auction of properties from Casey’s Professional Financial Investors Professional Investors Security Fund set for mid-September, according to court documents. Hamilton Zanze proposes to buy 60 of the 70 properties for $434 million in cash.

List of properties Hamilton Zanze & Associates plans to buy.pdf

After three dozen prospective buyers reviewed the property information, five offered to buy the whole portfolio, three wanted only the apartments, and one only the commercial space, according to court filings. The debtors’ committee selected Hamilton Zanze as the stalking horse bidder from three of the offers, but other entities have been reviewing the property information since then, the documents said.

The pending transaction would be unique for the North Bay in its size and mix of properties, according to Haden Ongaro, who runs North Bay operations for global real estate services company Newmark.

“Its unusual to have office combined with multifamily,” he said. “A lot of times, you have buyers that focus on multifamily but not in office space. And vice versa, there are are others that buy office buildings and lease office buildings but don’t work in the office world.”

The North Bay’s largest commercial real estate deal previously in terms of the number of properties and square footage was the 2005 sale by Basin Street Properties of 1.4 million square feet in 44 office and flex buildings to Equity Office for $263 million.

Then in January of this year, an affiliate of San Francisco-based Bay West Development and Forum Investment Group bought the 63-acre, 700,000-square-foot former Fireman’s Fund campus in Novato.

To top the stalking-horse bid for the PFI portfolio at auction, competing bidders would have to offer at least $442.68 million, according to the court. The deadline for bids on the PFI real estate portfolio is Sept. 7, and the auction is set for Sept. 13 at 11 a.m. at the San Francisco office of sale facilitator FTI Consulting, 50 California St., Suite 1900. The first court hearing on the sale is Sept. 15 at 10 a.m. in San Francisco.

Hamilton Zanze said through a spokesperson that it doesn’t comment on deals in progress.

Before his death in May 2020, Casey oversaw an operation that grossed $12.6 million in revenue the previous year from management of investments in a portfolio of 600,000 square feet of commercial space and almost 900 apartments, valued at the time of the Chapter 11 filing at $555 million, the Business Journal reported.

An audit of Casey’s estate led to a U.S. Securities & Exchange Commission investigation. Creditors forced a Chapter 11 reorganization filing in July 2020, and the SEC filed criminal charges last September. Late last year, Lewis Wallach pleaded guilty over $26.7 million embezzled from PFI while he was CEO, the Journal reported.

About 1,300 investors put $330 million into the Casey companies, federal prosecutors said.

Hamilton Zanze’s portfolio has grown since Mark Hamilton and Tony Zanze founded it in 2001, focused on acquiring and operating apartments. It has properties in the Pacific Northwest, Mountain states, lower Midwest, Texas, Georgia, Virginia and Maryland.

In 2007, the principals of Hamilton Zanze started Graham Street Realty to acquire and manage commercial properties. Today it owns more than 1.1 million square feet of commercial and industrial space in Northern California, Colorado and Washington.

If successful in the auction, Hamilton Zanze plans to have Paramount Property Company manage the North Bay properties, according to court documents.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

This story has been updated with input from a Hamilton Zanze & Associates spokesperson, comment from Haden Ongaro of Newmark and historical persective on large North Bay commercial property sales.

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