The Carnage

Hurricane Sandy did damage, no doubt to the Eastern segment of the financial district.  One of the buildings I walk by every day is 199 Water Street, also known as One Seaport Plaza.  Anchored by Abercrombie and Fitch and having BGC, Aflac, and Aon as its tenants; this building was something nice to look at.  Less than a block away from the Seaport itself, it is still under repair and I wonder how this will impact MSC 2007-HQ11.  Abercrombie and Fitch is still not up and running.  Want to get an expensive egg sandwich and coffee at Europa?  Forget about it.  BGC Partners was moved to Cantor's mid-town office for a stint as Jack Resnick & Sons tried to return the real-estate to it's pre-Sandy glory.

According to Moody's "the property was 98% leased as of March 2012, compared to 100% at the prior review and 97% at securitization." One Seaport represents 11% of MSC 2007-HQ11.  Just saying.  But beyond the questionable cashflows this collateral will eke out going forward, Hurricane Sandy poses larger questions for the insurance district in downtown NYC.  Why would any prospective tenant want to secure a major lease in the area after what happened?

GGP/Howard Hughes got lucky that their beauty was spared the destruction that a lot of the area's businesses could not escape.  It still pains me that I can't get my daily cup of coffee at the Flavor's at Water and John Street.  That business is a great franchise by the way and unfortunately, it looks like it will not be coming back. 

It's no secret that AIG is probably not going to roll it's lease at 180 Maiden Lane and despite SL Green doing a solid job of turning the lights back on after Sandy in about a month's time; it's hard to blame AIG for wanting to find a more secure and stable location.

I'm not sure if tenants will shift away from the Eastern side of FiDi or stay away from it altogether.  Two months out and still, not all the lights are up and running.  This could bode well for Midtown but let's see what kind of concessions property owners will make.  Their hand is weak, and wet.


~Jingle Male

SL Green wins suit against Mazal

SL Green announced last August that they had agreed to sell their 49.5% portion of 485 Lexington Ave to Mazal 485 (a partnership between Gilmore USA and Israel-based technology company Optibase) that valued the building about 21% lower than where SL Green had invested in 2007. Well, CWCapital, the special, apparently was not okay with the deal.

SL Green (and most other REITs) were sucking wind last summer, and then all of a sudden every REIT was able to go out and raise as much money as they needed and everything got better (still blows my mind).

So, Mazal cries foul, and says that in fact SL Green changed their mind once the market "improved" and their stock price went up. They claim it was a result of the deal, but all REITs were behaving similarly insane during that time period. Further, Mazal somewhat ludicrously claimed that SL Green should have fought the Special harder, and therefore now owes them damages. They wanted the damages reflected as a lower sales price on the same building and a $20mm option to buy the remainder of the building at similar terms all without lender consent, and asked a judge for as much.

Well, the court dismissed the claims today. The loan cash flows and doesn't mature until 2017. Citibank and Travelers are the big tenants, both expiring just before maturity. I think we can declare SL Green the winner, but 2017 looks like it's going to be a tough year to refi in.

485 Lexington Ave Changes Hands - WBCMT 2007-C30 & MSC 2007-HQ11

Bloomberg reported this morning that SL Green sold its stake in 485 Lexington (921,000 sq. ft. near Grand Central Station). The transaction values the property at $504.2mm, down from $635mm at issuance back in 2007 - or off about 21%. The article points to this as a "real wake up call" for NYC property values, but seems better than I would have expected...

The senior mortgage is split between $135mm portion in MSC 2007-HQ11 and a $315mm portion in WBCMT 2007-C30.