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.

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.

August 2010 Delinquencies up 1/2 billion to $61.4 billion

Realpoint came out with their August numbers. This is substantially faster than the June to July change of $387.9billion.

Balance of 90+ day delinquent loans declined (first decline since we started down this rabbit hole), every other bucket increased.

Total Realpoint Delinquency Level - 8.14%
sans Agency -- 8.48%
Conduit/Fusion - 8.61%


They reference the pipeline of problem loans too. All brand name loans typical of '06 and '07: EOP, ESH, PCV/ST, Beacon & Seattle, Farallon MHC, and CNL Hotels & Resorts. (That's 3 pari passu loans now)

Average Loss Severity in August - 62%. They have a nice breakout at the end regarding losses if you want some references.

Their report is free - realpoint.com.

GSMS 2007-EOP $4.9 billion getting restructured?

Bloomberg Reports:

April 22 (Bloomberg) -- Blackstone Group LP may ask creditors to restructure $4.94 billion of debt remaining from its 2007 purchase of Sam Zell’s Equity Office Properties Trust, according to two people familiar with the discussions.
Blackstone would consider paying down about 5 percent of the balance and agreeing to a slightly higher interest rate in exchange for extending the maturity, according to the people, who declined to be identified because the talks are private. The debt, which was packaged and sold as a commercial mortgage-backed bond in June 2007, matures in 2012, according to data compiled by Bloomberg.
While U.S. commercial property values have fallen almost 42 percent since 2007, the Blackstone properties are generating enough cash to pay the mortgages, according to the data. The private equity firm led by Chairman and Chief Executive Officer Stephen Schwarzman acquired the real estate in 2007 in a $39 billion leveraged buyout, the biggest to date at that time, and

Which will be a roadmap for all the poor schmoes they flipped the early properties to, also in CMBS deals (i.e. Beacon & Seattle in SS as of this month)...

Blackstone also sold EOP real estate Seattle, including 17 office buildings to Boston-based Beacon Capital Partners in 2007. Additional EOP sales were made in Diego and Portland, Oregon.

Update:
We should note that we looked at the financials in 2007 and 2008, and they were so screwed up even BoA (the servicer and lead) couldn't even tell us which properties were contributing how many dollars (a bunch were JVs) each period and what the actual debt service ratios were. You really couldn't even tell which properties were still contributing cash and which had been flipped, and it became apparent that BoA didn't know either. Even after spending a weekend with the financials and your own due diligence, there simply was too much misinformation and bad information that you couldn't nail anything down. I think it was intentional, and I didn't buy any bonds purely based on the lack of information issues, not even mentioning the credit issues. Oh I wish I could remember the names of the individuals and I'd publish them.

Orig List of Properties in the EOP deal:
Verizon Building
225 Franklin
500 Boylston (JV)
60 State Street (JV)
100 Summer Street
717 Fifth Avenue
10 & 30 South Wacker (JV)
Stamford Plaza Consolidated
Yahoo! Center (JV)
222 Berkeley (JV)
28 State Street
Santa Monica Business Park
Sun America (JV)
Center Plaza
150 Federal Street
10960 Wilshire Boulevard
Metro Center Tower
10880 Wilshire Boulevard
Concourse
Norwest Center (JV)
125 Summer Street
One Post Office Square (JV)
Wellesley Office Park
Westbrook Corporate Center
Wachovia Financial Center (JV)
Towers at Shore Center
30 North LaSalle
Frost Bank Tower
One North Franklin
Oakbrook Terrace Tower
Peninsula Office Park
Riverview
One Memorial Drive
Lakeway Center Consolidated
Xerox Campus
Rowes Wharf Office & Hotel (JV)
Corporate 500 Centre
Wilshire Palisades
Riverside
Gateway Office
Skyport Plaza-East
Ferry Building (JV)
Bayhill 4-7
300 West 6th
The Tower at NEEP
One Congress Plaza
225 West Santa Clara Street
Palo Alto Square
One American Center
300 Atlantic Street
Commerce Plaza
Promenade II (JV)
Pruneyard Office Towers
Ten Almaden
Skyway Landing
Canterbury Green
Civic Opera House
The Tower in Westwood
San Jacinto Center
Sunnyvale Business Center
Foothill Research Center
101 North Wacker
Arboretum Courtyard
1500 Page Mill
Century Square
Corporate Centre
Searise Office Tower
Pruneyard Shopping Center
Metro Plaza
175 Federal Street
The Plaza at San Ramon
555 Twin Dolphin Plaza
177 Broad Street
Bay Park Plaza I + II
Shorebreeze I and II
One Lincoln Centre
Larkspur Landing Office Park
161 North Clark (JV)
333 Twin Dolphin Plaza
Pointe O'Hare
Austin Research Park I & II
Pasadena Financial
Embarcadero Place
700 North Brand
Hacienda Terrace
1221 Brickell (JV)
Ten Canal Park
25 Burlington Mall Road
One Bay Plaza
Drake's Landing
790 Colorado
Golden Bear Center
Bridge Pointe (JV)
1740 Technology
Pasadena Towers (JV)
2180 Sand Hill Road
Clocktower Square
Stonebridge Plaza II
201 Mission (JV)
429 Santa Monica Boulevard
1111 West 22nd Street
South Station
Santa Clara Office Center I - IV
SunTrust Center (JV)
Park 22
San Mateo Bay Center I
Fountaingrove Center
San Mateo Bay Center II
Treat Towers (JV)
One Canal Park
Prominence at Buckhead (JV)
Harbor Drive Executive Park
Westech 360
2951 28th Street (JV)
Redwood Business Park II
1200 Corporate Place
580 California (JV)
Wood Island Office Complex
Redwood Business Park III
Shoreline Office Center
3850 and 3880 Brickway Boulevard
Community Corporate Center
Skyport Plaza-West
Woodside Office Center
1333 H Street (JV)
Oak Valley Business Center-Cons.
The Lakes
1111 East 19th (JV)
Patrick Henry Drive
77 South Bedford Street
Great Hills Plaza
World Trade Center East (JV)
Redwood Business Park I
San Mateo Bay Center III
1700 Market (JV)
1620 L Street (JV)
Redwood Business Park IV
Waterfall Towers
Lockheed Building
Parkpoint Business Center
1601 Market (JV)
Redwood Business Park V
1179 North McDowell
Fountaingrove Executive Center
Scott Boulevard