Monday, October 4, 2010

John Hancock Tower flipped, again

WSJ reports:
Boston Properties Inc. agreed to acquire the John Hancock Tower and Garage in Boston from private-equity firms Normandy Real Estate Partners and Five Mile Capital Partners for about $289.5 million, plus the assumption of about $640.5 million in debt.



Timeline
2006 - Broadway acquires from Beacon using $640mm Senior and a $723mm mezz.; Appraises at $1.3mm
2009 - Borrower defaults, Normandy and Five Mile pick up the mezz for $20.1mm, assume the senior, takeover ownership.
2010 - Normandy and Five Mile make 10x their investment less than 1.5 years later.

Good for GG9.

6 comments:

Pratik said...
This comment has been removed by the author.
Pratik said...

Will Boston Properties refinance the senior mortgage to take advantage of the low cap rates or will they assume the current debt?

Also trying to understand the reason for the $290mm premium paid over the senior mortgage. The property is 91% occupied and still cant cover the senior debt service. Could a higher occupancy and increased rents justify the premium?

Dark Space said...

It appears that they assumed the mortgage, but perhaps they refi at some point. Currently it is in its defeasance period for another 72 months.

The property is now closer to 100% occupancy after they signed Bain Capital 3 months ago for 208k sq ft with an option to bring that to 290k sq ft.

Other tenants listed in that article are: Ernst & Young, State Street Corp., Arrowstreet Capital, and UBS. I don't have the latest rent roll, but that is a little different than what is in the servicer tape.

Steve said...

"Normandy and Five Mile make 10x their investment less than 1.5 years later" seems a bit aggressive. The tenant improvements and leasing commissions associated with the Bain Capital lease itself is a big equity check. Surely, there were other capex projects in progress as well (something to do with the garage, if I'm not mistaken). Nonetheless, a great investment for Normandy and Five Mile.

Concrete Jungle said...

Maybe. In all fairness I didn't dig through the financials, but in addition to shortfalls in debt service, I read somewhere that they had spent about $50mm on improvements to the lobby, the Blue Cafe and at least started the additional parking spaces, and the new owners had set aside $15mm to continue these projects. For the life of me I can't find the article now that I'm searching for it. Anyway, chalk it up to $89mm in capex and debt service shortfalls and its still a 10x return on their $20.1mm investment...

Concrete Jungle said...

Found it in the sale agreement, and I was wrong! Only $6 of the $50 was funded by the Seller, so BXP is actually footing that big bill.