Monday, June 2, 2014

Willis (Sears) Tower is transferred to special for imminent default

Well, well,  what do we have here?  According to Fitch:

Transactions: LBUBS 2007-C2 ($337.6 million) & LBUBS 2007-C7 ($49.6 million)
Property: Sears Tower (Willis Tower)
City/State: Chicago, IL
Property Type: Office
Balance: $498,885,497 Senior CMBS Debt* ($774,389,429 Total Loan Balance)
*Also includes loan pieces in LBUBS 2008-C1 and JPMCC 2013-WT (Not Rated by Fitch)
MS: Wells Fargo
SS: CWCapital Asset Management
Reason for Transfer: Imminent Monetary Default (Borrower requested a loan modification)

According to the servicer, the borrower anticipates significant 
capital costs going forward in order to secure additional new leases.  
Occupancy has improved to 83.8% as of March 2014, from 75% in December 

One of the co-owners, Joe Moinian, is known for asking for loan modifications (e.g. The Renaissance).  Another co-owner, Joseph Chetrit, has quite a reputation in CRE circles.
It is interesting that LBUBS 2007-C2 AJ is already a first-loss piece (thanks to Orix dumping all the loans they serviced in one single month).  An A/B note modification could make it the first zombie AJ!


Anonymous said...

It's funny to equate the losses on the loans to the special servicer when the originators of said loans are likely more to blame.. no?

crabsofsteel said...

With the Lehman bankruptcy resolved, it would be tough for the special servicer to find any recourse by filing a repurchase claim since Lehman no longer exists except as a shell.

crabsofsteel said...

Update: Fitch modified their comments to read

Reason for Transfer: Borrower requested a loan modification which includes a complex
lease approval.

Anonymous said...

I think your repurchase statement was aimed at me. Which, bluntly, misses the point. Lehman originated the loans at crazy levels - I'm saying regardless of who the SS was at time of resolution losses would have been similar. So naming any one special is moot in this case IMHO.

crabsofsteel said...

I'm not sure of what your point is. I don't equate losses with who the special servicer is; Fitch just reports to which special the loan was transferred. The original special servicer has right of refusal over any loan in a deal, so can be blamed for accepting the silly pro-forma underwriting on Sears Tower. Similarly, Cwcapital did buy the servicing rights on the deal, so presumably looked at its performance.