575 Lex negotiations falter...

Nomura and Crain's reported this morning that talks broke down between the owners (CalSTRS and Silverstein) and Rockrose Development and the owners have taken the property off the market.

Our previous posts on the property are here.

I haven't seen the front pays trade in a couple of weeks, but this definitely pushes the BACM 2007-2 A2 out much longer(years, not months) than if the loan had paid off. BACM 2007-1 A2 is a little different with 2 large maturity defaults that could resolve and several large loans due in the 1Q 2013, then the A3 doesn't start getting additional paydowns until late 3015 and mid 2016.

575 Lex Under Contract

Nomura and Barclays both stated this loan is under contract, pointing out that the reported sales price of $370mm is well north of the $257mm loan balance and the most recent appraisal. Nomura referenced a Bloomberg story, but I missed it.

My absence tends to fuel market rallies, based on historical evidence, so I wanted to let everyone know I'm taking off for the rest of the week. You may want to load up on bonds before the day is over.

Beacon and Seattle

Deutsche Bank had an article out early this morning (I was actually at my desk when it hit, which is unusual in and of itself, and it scared me when I got an email) on Beacon and Seattle.

It was very detailed and well done, and I'm not going to do it proper justice, but the basic premise was that the senior bond holders are not getting a fair shake - this loan in particular spans 6 different CMBS deals with projected shortfalls breaching the AJs on two of the deals. Noting in the conclusion that the sales prices on the released properties have exceeded $1.1billion, while less than $840mm of the senior debt has been retired.

Various Loan Updates

Barclays cranked out notes on a number of resolutions, modifications, and appraisals the last few weeks. I went back over the last few weeks and updated any that I missed or didn't post from elsewhere:

WBCMT 2007-C31 - Lembi Portfolio $142.5mm 9/14/11
AREA Properties purchased a portion of the portfolio (20 of the 29 properties) for $59.6mm. BCG estimates a 25% severity related to that purchase, and speculates that the purchase covers the 20 REO properties that accounted for $63mm of the original balance.

LBUBS 2006-C7 AJ takes a shortfall 8/17/11

MSC 2006-IQ12 - $250mm RREEF Industrial Portfolio to be sold. BCG anticipates the loan will be assumed. 8/17/11

BACM 2007-1 and BACM 2007-2 -- $325mm 575 Lexington Avenue. new appraisal is up 30%. See additional comments here. 8/16/11

GCCFC 2007-GG9 - $305mm Schron Portfolio appraised at $121.2mm 8/12/11


WBCMT 2004-C10 and WBCMT 2004-C11 - $500mm Starret-Lehigh refinanced. 8/11/11

I'm going to set up a Girl Scout Cookie stand at One Park Ave

Looks like One Park Avenue is likely to pay down as early as next month according to stories in CMAlert and a report out from Barclays today. The $375mm loan is in BACM 2007-2 (6.01%) and BACM 2007-3 (5.36%), and Barclays thinks the defeasance (BB shows it as having 9 months of lockout? maybe that is incorrect) will get waived and it will pay off.

In other words, you might not want to buy the BACM 2007-2 A1s offered at 101-01 today (even though they got lowered from 101-02...), and you probably didn't get that great a deal if you bought those BACM 2007-3 A2 last week at 104

According to Barclays, the recap included a $250mm 5year from MS for the next CMBS deal, $180mm equity from Vornado for 95% of the deal, and Murray Hills is retaining the remainder 5%. The total cash involved here is $430mm. This is not a clean trophy property sale, though. The senior mezzanine holder, RXR owned $75.4mm (M1), was pressing hard for action including potential foreclosure. The $50.4mm residual was held by Citi and the $32.6mm M2 was held by BOA for a total debt stack of $483.4mm. BCG expects the M2 will take a substantial hit - my math says the M1 is going to take a pretty good hit too, and once we start adding in fees it may get worse.

I've really just been looking for an excuse to use this picture - those girl scouts are hard core and you don't want to mess with them.

Market Square sold for $615mm

I know, I know, I'm a little behind, but late is better than never.

The trophy DC office property located on the 700 and 800 blocks of Pennsylvania Avenue was part of the Beacon Seattle Portfolio in WBCMT 2007-C31, WBCMT 2007-C32, BSCMS 2007-PW16, BACM 2007-2, MSC 2007-IQ14, and MSC 2007-HQ12. The $905 psf price implies an approximate cap rate of 4.22%.

Note that the $2.644b loan (20 properties) was extended from a May 2012 maturity to a 2017 maturity, and this should result in a partial and substantial release from the loan.

I'd definitely keep an eye out on any current- or next-pay bonds on these deals. For example, it represents 15.66% of the collateral behind the WBCMT 2007-C31 A2 that is currently offered at 255 $104-11 - all else equal, if you assume the full sales price is released, you lose nearly 100 bps of yield and your bond shortens by over 1 year. And, as Barclays pointed out earlier this week, or maybe last week, the reserve requirements are likely to go down as well resulting in further releases.

575 Lexington Foreclosure

Saw a note circulated today, but no additional news since. It's in BACM 2007-1 and BACM 2007-2.

Of course, 11 months ago it was "imminent" too...

575 Lexington Default Imminent - BACM 2007-1, BACM 2007-2

575 Lexington Default Imminent...

Silverstein and Calstrs paid $400 million for the building. The balance on a loan being transfered to so-called special servicing is $325 million, Fitch said.

The CMBS loan is

• split into two $162.5mm pari passu notes.
• LNR is the Special
• YE '09 DSCR 0.71x; Occupancy at 89%; $14.4mm NOI (underwater at even tight cap rates)
  
• 639,685 Square Feet. Includes Cornell University (16.63%; expires 3/2018).
• Special Servicer notes that the Feb 2009 inspection rating was "Fair" and that the borrower is asking $70+psf rents on vacant space. Average Class A Manhattan Office is more like $60-$65 psf.
• Unlike a lot of other NYC Office that is underwater, there is $0 in the Debt Service Reserve on this property. There is a small Replacement reserve ($432k) and a $6.2mm TI/LC reserve account.