Aozora Bank is in the process of buying $500 million of performing commercial
mortgages from the U.S. real estate lending arm of Dutch bank ING. The
acquisition has been closing in stages over the past few months and is nearing
completion. Overall, Tokyo-based Aozora is buying 15 loans for roughly par
value. ING Real Estate negotiated the deal without using a broker. The
disposition follows INGs decision in September to suspend its U.S. lending
operation and lay off roughly half of its staff about a dozen people in New
York and Los Angeles. At the time, the unit, ING Real Estate Finance U.S., had
$6 billion to $7 billion of commercial mortgages. Its unclear if ING plans to
shop additional loans in its portfolio. Aozora has been increasing its U.S.
portfolio, both by participating in syndicated loans and acquiring mortgages.
Most of the loans it is purchasing from ING were originated from 2008 to 2012.
Among the borrowers are some of the biggest names in real estate, such as
fund shop Blackstone of New York, Tishman Speyer of New York and mall operators
Simon Property of Indianapolis and Macerich of Santa Monica, Calif. The
portfolio includes a piece of the $1.3 billion of senior debt that Deutsche
Bank, Lehman Brothers and UBS arranged in 2008 for a Boston Properties
partnership on the 1.8 million-square-foot General Motors Building in Midtown
Manhattan. The portfolio also includes a portion of the debt package on the
643,000-sf office building at 120 Park Avenue in Midtown Manhattan. HSBC and...
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ING Selling $500 Million of Loans to Aozora
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ING Selling $500 Million of Loans to Aozora
Aozora Bank is in the process of buying $500 million of performing commercial
mortgages from the U.S. real estate lending arm of Dutch bank ING. The
acquisition has been closing in stages over the past few months and is nearing
completion. Overall, Tokyo-based Aozora is buying 15 loans for roughly par
value. ING Real Estate negotiated the deal without using a broker. The
disposition follows INGs decision in September to suspend its U.S. lending
operation and lay off roughly half of its staff about a dozen people in New
York and Los Angeles. At the time, the unit, ING Real Estate Finance U.S., had
$6 billion to $7 billion of commercial mortgages. Its unclear if ING plans to
shop additional loans in its portfolio. Aozora has been increasing its U.S.
portfolio, both by participating in syndicated loans and acquiring mortgages.
Most of the loans it is purchasing from ING were originated from 2008 to 2012.
Among the borrowers are some of the biggest names in real estate, such as
fund shop Blackstone of New York, Tishman Speyer of New York and mall operators
Simon Property of Indianapolis and Macerich of Santa Monica, Calif. The
portfolio includes a piece of the $1.3 billion of senior debt that Deutsche
Bank, Lehman Brothers and UBS arranged in 2008 for a Boston Properties
partnership on the 1.8 million-square-foot General Motors Building in Midtown
Manhattan. The portfolio also includes a portion of the debt package on the
643,000-sf office building at 120 Park Avenue in Midtown Manhattan. HSBC and...
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Arbor Expands to CMBS Lending, Taps Hirsch
Arbor Commercial Mortgage is expanding its lending business to include
commercial MBS loans and has hired market veteran Todd Hirsch to oversee the
effort. The finance firm already actively originates Fannie Mae and HUD
loans, as well as bridge loans and mezzanine loans. Now it is expanding its
product menu to include CMBS loans. The company, based in Uniondale, N.Y.,
will target fixed-rate CMBS mortgages of $5 million to $100 million on the
major property types, although the initial emphasis will be apartment complexes
its traditional focus. It might also securitize floating-rate bridge loans.
Arbor expects to fund more than $200 million of mortgages under the program
during the first year. The company is believed to have picked a securitization
partner, which will underwrite the transactions to which Arbor contributes
loans. Arbor also has the option of syndicating loans with institutional
partners. Hirsch, a former longtime executive at Credit Suisse, plans to
recruit several staffers for an origination team in New York, where he is
based. That team will supplement existing originators at Arbors 12 offices
nationwide. Hirsch started late last month as executive vice president and head
of CMBS finance and distribution. He reports to chief executive Ivan Kaufman.
At Credit Suisse, Hirsch was a managing director and most recently served as
head of the European finance group, where he managed the CMBS portfolio and
structured and managed joint ventures. Before that, Hirsch was in the U.S. C...
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As Distressed Plays Wane, Fund Count Falls
The number of funds focused on high-yield debt plays has fallen back to
pre-crash levels. An annual review of active high-yield funds by sister
publication Real Estate Alert identified 49 commingled vehicles dedicated
mostly to debt investments. That was down 10, or 17, from a year ago (see list
on Pages 12-14). The combined equity goal of funds declined at a slower pace
7, to $32.9 billion from $35.2 billion. Thats because the introduction of
giant vehicles sponsored by Blackstone and Pimco offset the decline. The
number of active debt funds surged to a peak of 73 in 2009, from 54 the
previous year, reflecting an influx of investment managers seeking to pool
capital in order to buy distressed loans at deep discounts or originate
high-coupon mortgages amid a pullback by traditional lenders. But the
anticipated bonanza of high-yield opportunities didnt fully materialize, and
many of those planned vehicles never got off the ground, contributing to a net
reduction in the number of funds. Likewise, the aggregate equity goal of debt
funds has plunged by 32 from the $48.3 billion peak in 2009. Overall, Real
Estate Alerts review identified 409 active closed-end funds that invest in
commercial properties, debt or both. Vehicles are considered active if they are
still raising capital or if they have already held final closes but have
invested less than 75 of their equity. So each year, a rotating group of funds
is counted. This year, 21 vehicles were added to the list, and 31 exited,...
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Deutsche, Citi Land $550 Million Mall Loan
Deutsche Bank and Citigroup have agreed to provide a $550 million mortgage on
Scottsdale Fashion Square, a high-end mall near Phoenix. The 1.9
million-square-foot property, in Scottsdale, Ariz., is owned by a 50-50 joint
venture between Calpers and Macerich, a REIT in Santa Monica, Calif. Deutsche
and Citi will each fund half of the loan and will securitize it via a
single-asset deal that is expected to hit the market in a few weeks. The
leverage is low around 60, according to market sources. The
Calpers-Macerich partnership will use the proceeds to retire a $550 million
fixed-rate loan that matures in July. Goldman Sachs originated that six-year
mortgage in 2007 and securitized it in two deals: Commercial Mortgage Trust,
2007-GG11, and Citigroup Commercial Mortgage Trust, 2008-C7. The malls
anchors are Dillards, Macys, Nordstrom and Neiman Marcus. In-line sales are
$603/sf. The property was built in phases, in 1962 and 1974, and later
expanded, most recently in 2009. The loan is collateralized by 1.3 million sf,
including 123,000 sf of office space. The rest of the space is owned by the
anchors. Macerich assumed its stake in 2002 as part of its $1.5 billion
takeover of Phoenix-based Westcor Realty. Calpers already owned its 50 stake
at the time.
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Banks Ease Loan Standards Amid Competition
Heightened competition for loans to high-quality sponsors is forcing commercial
banks to lower their credit standards to win business. Lenders report that
jockeying for the most-attractive assignments has hit a level not seen since
before the credit crunch. It looks like 2006 again, said one lender at a
large U.S. bank. Commercial banks, both domestic and foreign, said
competition has surged across the board over the past few months. For
construction and short-term mortgages, its mostly coming from other
balance-sheet lenders, including banks returning to the market after laying low
because of the financial crisis. For long-term mortgages, resurgent
securitization programs are adding to the competition. So far, the frenzy for
business, limited mostly to top-notch borrowers, hasnt reached the level seen
at the market peak in 2007. And theres still more hand-wringing about thin
loan spreads than slipping underwriting standards. But for the choicest
assignments, banks have had to offer concessions to borrowers on such loan
terms as interest-only and prepayment-lockout periods, cash-reserve
requirements, debt-yield covenants and recourse levels. And lenders said that
leverage levels on portfolio loans are starting to creep up, sometimes
indirectly via the use of aggressive property valuations. Many lenders,
having increased their origination goals for 2013, feel pressure to drop
standards to win assignments. I spend a lot of time lately coming up with...
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BofA in Lead for Big NY Apartment Mortgage
Bank of America has the inside track on a $550 million fixed-rate loan on an
apartment complex in the Tribeca section of Manhattan. The 1,328-unit
Independence Plaza is owned by the team of Vornado Realty and Stellar
Management, both of New York. BofA is expected to get the nod to write a
five-year mortgage, according to market pros. A second lender might also be
tapped. The loan will likely be securitized this quarter in a stand-alone deal.
Eastdil Secured is arranging the financing. Vornado gained a 58.75 stake in
the ownership group through a series of transactions that culminated last
December. Stellar owns the remaining interest. They will use most of the loan
proceeds to retire $329.2 million of maturing debt. The complex, which is 98
occupied, consists of three 39-story towers, at 40 Harrison Street, 80 North
Moore Street and 310 Greenwich Street, a half-dozen blocks north of the World
Trade Center. It includes 55,000 square feet of retail space and a parking
garage with more than 500 spaces. The property was built as luxury housing in
1976, but struggled initially because there were few residential amenities in
Tribeca at that time. The area recently has seen widespread development,
emerging as one of the citys most sought-after residential neighborhoods.
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Barclays Ditches UBS, Links With JP Morgan
Barclays is parting ways with conduit partner UBS.
The British bank has decided to team up with J.P. Morgan on its next
multi-borrower securitization. The move came after weeks of turmoil at UBS.
Seventeen staffers have exited the commercial MBS group over unhappiness about
annual bonuses announced last month. Among them: former group head Ken Cohen,
who joined Bank of America, and top lieutenants Brett Ersoff and John Herman,
who jumped to Rialto Capital. Barclays didnt return calls seeking comment,
but market professionals said the bank was motivated to find a new partner for
two reasons. First, it had doubts about whether the shrunken UBS lending team
could sustain its usual origination pace. And the bank was concerned over the
pricing concessions that bond buyers demanded on the UBS-Barclays conduit
transaction that priced last week. Investors demanded a spread of 98 bp over
swaps on the deals benchmark super-senior class. That was significantly wider
than the spreads of 90 bp and 93 bp recorded by two other multi-borrower deals
that priced within a few days. The wider spreads on that deal were one
factor, but probably not the most important thing, said one sell-side veteran.
They are probably most concerned about having a good, stable lending platform.
You dont want to find yourself with a big inventory of loans and a partner who
is not ready to issue. CMBS lenders join forces to achieve critical mass for
a transaction sooner, thereby limiting their risk of warehousing loans and...
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Pru Team Seeks to Refinance 11 Times Square
A Prudential Real Estate Investors partnership that owns the office building at
11 Times Square in Midtown Manhattan is seeking to refinance a $507 million
loan that it was forced to modify a year ago. Pru and its partner, SJP
Properties of Parsippany, N.J., have begun preliminary discussions on a
long-term, fixed-rate mortgage. They are pitching the assignment primarily to
insurance companies. The 1.1 million-square-foot tower, which opened in 2011,
was only 43 leased when its $714 million construction loan matured in March
2012. Unable to refinance the full amount, the Pru team agreed to pay down $207
million of principal in return for a two-year extension of the term, plus a
one-year extension option. But the buildings fortunes have since improved.
The occupancy rate has climbed to 69, according to CoStar. And the values of
Manhattan office properties have spiked. So Pru and SJP are now eager to lock
in a long-term loan of the same size. The propertys anchor tenant, law firm
Proskauer Rose, has a lease on 406,000 sf until 2031, according to CoStar. In a
major coup for the Pru team, Microsoft signed a 205,000-sf lease around
yearend. Two other tenants were also recently recruited: eMarketer (54,000 sf)
and Mexican-themed bar-and-grill Senor Frogs (22,000 sf). The existing bank
syndicate was co-led by PNC and Bank of America, but BofA sold its position to
another syndicate member, New York Life, in conjunction with the modification.
The lenders with the largest pieces now are New York Life, MetLife and Helaba...
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CIBC, Invesco Write Times Square Retail Loan
CIBC and Invesco Real Estate have written a roughly $200 million floating-rate
debt package for SL Green Realty and investor Jeff Sutton on 51,000 square feet
of retail space in the heart of Manhattans Times Square. CIBC funded the
senior portion of about $170 million and is expected to syndicate it.
Dallas-based Invesco took down some $30 million of mezzanine debt. The debt
package, which closed this week, is backed by the 12,368-sf building at 1552
Broadway and a lease on 38,433 sf at the adjacent 222,000-sf building, at 1560
Broadway. The four-story property at 1552 Broadway, known as the I. Miller
Shoe Building, is at the northeast corner of West 46th Street and Seventh
Avenue, where Seventh Avenue and Broadway begin to cross. The 17-story building
at 1560 Broadway wraps around 1552 Broadway, with frontage on both Seventh
Avenue and West 46th Street. The debt package, arranged by Meridian Capital,
has a three-year term and two one-year extension options. The loan-to-value
ratio is about 70, which pegs the value of the collateral at some $285
million. New York-based SL Green and Sutton teamed up in 2011 to buy the
diminutive, landmark building at 1552 Broadway from Riese Organization of New
York for $136.2 million. The duo also negotiated a long-term operating lease
on space on the lower three floors and basement of 1560 Broadway, which is
owned by union Actors Equity Association. The lease gave the SL Green team the
option of knocking down walls between the buildings, effectively expanding 1...
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Morgan Stanley Skips CMBS, Syndicates Loan
Switching gears, Morgan Stanley has syndicated a $240 million fixed-rate mall
loan, rather than securitizing it. Morgan Stanley divided the 12-year loan
into two pieces and placed them separately with Cornerstone Real Estate and New
York Life. The mortgage is backed by the 1.2 million-square-foot Valley Plaza
Shopping Center, a mall in Bakersfield, Calif., that is owned by General Growth
Properties of Chicago. When Morgan Stanley wrote the loan on Feb. 11, it
planned to securitize it via a stand-alone deal. But the commercial MBS market
was subsequently flooded with single-borrower transactions backed by mall
paper, causing spreads to blow out. Morgan Stanley met pricing resistance in
March on the stand-alone securitization of another loan it had written for
General Growth. That $160 million mortgage was backed by the 1.1 million-sf
Altamonte Mall in the Orlando suburb of Altamonte Springs, Fla. Price talk
for that offering wasnt distributed, but investors and CMBS traders at rival
shops said the spreads were wider than expected. A $74.4 million triple-A class
with an 11.9-year average life was priced to yield 3.64 barely inside the
3.72 loan coupon. The yields on four subordinate classes totaling $63.1
million were unclear, but presumably exceeded the loan coupon if Morgan Stanley
didnt retain them. In the wake of the weak execution of that offering and
single-borrower mall transactions floated by other dealers, Morgan Stanley
switched to the syndication market. Its unclear at what yield Morgan Stanley...
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Brookfield Taps Deutsche Team for NY Towers
A syndicate led by Deutsche Bank has agreed to lend up to $1 billion on two
office buildings at Lower Manhattans Brookfield Place complex, known until
recently as the World Financial Center. The other lenders participating are
Bank of America, Citibank, Royal Bank of Canada and Wells Fargo. The
floating-rate loan is sized at $800 million, with an accordion feature that
could permit another $200 million to be drawn down. Each bank has pledged to
fund one-fifth of the mortgage. Some or all of the participants are seeking to
syndicate a portion of their commitments. The term is expected to be three
years, with two one-year extension options. The complex, owned by Brookfield
Office Properties of New York, encompasses four buildings with 7.2 million
square feet. The collateral for the mortgage is the 2.4 million-sf Tower 2, at
225 Liberty Street, and the 1.8 million-sf Tower 4, at 250 Vesey Street. The
buildings, which were constructed in 1986 and 1987, are fully occupied, but
BofA leases almost two-thirds of the space under agreements that expire in
September. The bank inherited the leases via its takeover of Merrill Lynch and
is expected to vacate much of that space as it consolidates employees at its
new Bank of America Tower, at One Bryant Park. BofA already subleases some its
space at Brookfield Place, and the subtenants may stay on. But there is
significant rollover risk for the lenders. As a result, Brookfield is
providing a corporate guarantee on 20 of the debt, in addition to the value...
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John Buck Seeks Loan to Buy Chicago Tower
The prospective buyer of an office building in downtown Chicago is looking for a
$204 million loan to help finance the deal. A partnership between Chicago
fund shop John Buck Co. and a syndicate of South Korean investors has agreed to
purchase the 1.1 million-square-foot skyscraper, at 161 North Clark Street,
from Tishman Speyer for $348 million. The group is shopping for a five-year
mortgage via broker Eastdil Secured, and is accepting both fixed- and
floating-rate proposals. The 50-story building is 94.9 leased, according to
CoStar, with no single tenant accounting for more than 9 of the space. The
property was part of a 6 million-sf Chicago office portfolio that Tishman
bought from Blackstone for $1.7 billion in 2007. Blackstone had picked up the
six properties a few months earlier via its $39 billion takeover of Equity
Office Properties. Tishmans 2007 acquisition was financed with a $1.4
billion floating-rate debt package from Bear Stearns, which intended to
securitize a portion of the debt. Meanwhile, New York-based Tishman intended to
flip three of the properties. Both plans were scuppered by the credit crisis.
The following year, Bear sold $360 million of the senior debt to Wachovia,
soon to be absorbed by Wells Fargo. Most or all of the rest ended up in the
hands of the Federal Reserve Bank of New York when Bear disintegrated later in
2008. Currently, $655.1 million of the debt is held by the Feds Maiden Lane 1
vehicle. A 2010 restructuring of the portfolios debt extended its maturity...
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Blackstone Gets $551 Million Hotel Loan From GE
GE Capital Real Estate has provided Blackstone with a $551 million loan to
refinance a portfolio of 16 hotels. The floating-rate loan, which closed this
week, has a three-year term and two one-year extension options. HFF advised
Blackstone on the financing. The debt is backed by a 4,798-room portfolio,
roughly half of it in Florida and the rest scattered across the country. The
hotels, plus a golf-and-tennis club, were acquired from MeriStar Hospitality.
Some were in a nine-hotel pool the New York fund giant purchased from MeriStar
early that year for $367 million. The rest were assumed when Blackstone
subsequently acquired the Bethesda, Md., REIT in a $2.6 billion deal. Most of
the proceeds of the new mortgage were used to extinguish existing loans,
totaling roughly $470 million. The breakdown of that debt was unclear, but it
included at least one bank loan as well as an allocated portion of a
securitized loan. Eight of the hotels had been among 35 properties that
collateralized a $1.5 billion debt package Bear Stearns, Bank of America and
Merrill Lynch originated for Blackstone in 2006. The $835 million senior
portion was included in a $1.8 billion commercial MBS deal the following year
(BSCMS 2007-BBA8). Blackstone soon thereafter began selling properties out of
the pool, sharply reducing the balance over time. The loan was due to mature in
2011, but was modified and extended. The remaining balance was paid off this
month. The properties backing the GE mortgage are: The 742-room DoubleTree...
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Razor-Thin Loan Pricing Extends to Suburbs
amp;nbsp;
A Tishman Speyer partnership is close to nailing down a low-leverage mortgage
on a suburban Philadelphia office complex at a razor-thin spread that is
raising eyebrows.
Market pros familiar with the deal said that some banks have offered to lend
$78 million at 140 bp over one-month Libor for 3-5 years.
Thatamp;rsquo;s being described as among the lowest spreads that lenders have
quoted in the current cycle on a suburban property amp;mdash; in this case, the
1.1 million-square-foot Bala Plaza complex in Bala Cynwyd, Pa.
amp;ldquo;Itamp;rsquo;s the deal that keeps coming up when people talk about how
crazy pricing has gotten,amp;rdquo; one lender said last week.
The Tishman partnership, which has shopped the assignment mostly to U.S. and
foreign banks, appears to be close to selecting a lender. It would use the
proceeds to refinance existing debt.
Until recently, rock-bottom mortgage spreads were largely limited to
properties in top markets, like New York and Washington. But growing
competition for business has led lenders to bid aggressively on assignments for
a broad range of properties. One lender noted that six months ago, a
five-year floater on a suburban office building typically carried a spread of
200 bp over Libor, assuming a 55 loan-to-value ratio. Now the spreads on s...
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Vornado Moving to Refi Penn Plaza Offices
Vornado Realty is quietly talking to lenders about refinancing its $330 million
mortgage on an office building across from Penn Station in Midtown Manhattan.
The REIT is asking portfolio and securitization shops for proposals on the
maximum amount of senior fixed-rate debt they would provide on the 1.1
million-square-foot property, called 11 Penn Plaza. The term can be 10, 12 or
15 years. Vornado, which isnt using a broker, has indicated it will compare
proposals based on the amount of proceeds, the loan spread and the term. After
a first round of proposals, the company will specify the loan size and term and
then ask a limited number of lenders to compete in the second round. Lenders
said the mortgage could end up approaching $500 million. The existing $330
million floating-rate loan was originated in December 2011 by HSBC, Deka Bank
and United Overseas Bank of Singapore. Its unclear when that seven-year loan
becomes eligible for prepayment. The loan, pegged to Libor plus 235 bp, wont
begin amortizing until 2015. The 23-story building is fully leased, according
to CoStar. Macys, whose flagship store is a couple of blocks away, is the
anchor tenant. This year it renewed its lease on 646,000 sf, or almost
two-thirds of the space, until 2035 for its merchandising group. AMC Networks
has a lease on 260,000 sf until 2017. The weighted average office rent is
$55.84/sf. There is also 17,000 sf of retail space with an average rent of
$152.94/sf. The building, at 150 West 32nd Street, was constructed in 1923...
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Cerberus Wins B-Piece as Buyer List Grows
Cerberus Capital has snagged its first B-piece, becoming the latest in a slew of
new bidders to win the junior classes of a commercial MBS offering. Cerberus
is teaming up with longtime B-piece player CWCapital to buy the
below-investment-grade tranches of a $1.35 billion conduit offering that Wells
Fargo and RBS are expected to bring to market in August. The deals collateral
pool will also include loans from Basis Investment, C-III Commercial Mortgage,
Liberty Island and National Cooperative Bank. Investors with no track record
in the sector have elbowed their way into B-piece auctions in recent months,
seeking high yields. Two other players have circled their first purchases this
year: AllianceBernstein, in a partnership with Raith Capital, and Perella
Weinberg. Also, the team of Basis and Artemis Realty, in a joint venture with
CWCapital, took down its first B-piece last year. Meanwhile, the buzz is that
Pimco and Oaktree Capital are among new bidders that havent yet won any
B-pieces, along with Prime Finance and Saba Capital. The upshot: More players
than ever are in the hunt for first-loss CMBS. Before the market crash, the
acquisition of B-pieces was dominated by a handful of firms. That still remains
the case: Six firms account for 80 of the 75 B-pieces placed since
multi-borrower securitizations were revived in 2010: Rialto Capital (21 deals),
Eightfold Real Estate Capital (14), BlackRock (9), LNR (6), CBRE Capital
Partners (5) and H/2 Capital (5). But 15 different players have won at least...
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Deka, HSBC to Split Floater on Seattle Tower
Deka Bank and HSBC have agreed to write a $212 million floating-rate loan on a
Seattle skyscraper that changed hands this month in an all-cash transaction.
The five-year mortgage would be backed by Wells Fargo Center, a
984,000-square-foot downtown office building. Ivanhoe Cambridge bought the
property this month for about $390 million from Boston fund operator Beacon
Capital, in Seattles largest office trade so far this year. The loan is
expected to close within a month, with Deka and HSBC splitting it evenly. The
price tag indicates a loan-to-value ratio of about 54. The debt yield would be
around 9. Eastdil Secured helped line up the debt for Ivanhoe, the real estate
unit of Canadian pension-fund advisor Caisse de Depot et Placement du Quebec.
Ivanhoe is a deep-pocketed investor that had the luxury of time, as one
market pro put it, to line up debt after buying the building. But it likely was
motivated to act quickly because interest rates have begun to rise. The
47-story Wells Fargo Center, at 999 Third Avenue, was built in 1983. It is
about 73 leased, according to CoStar. Tenants include engineering firm Parsons
Brinckerhoff (109,000 sf), accounting firm Moss Adams (95,000 sf) and
healthcare provider Alere Wellbeing (63,000 sf). Before the sale, the
property had $310.7 million of debt. That was an allocated portion of a $2.7
billion debt package originated in 2007 by multiple lenders to help finance
Beacons acquisition of a 9.8 million-sf portfolio of 20 office properties in...
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Cerberus Taps JP Morgan for Big Hotel Loan
J.P. Morgan has won a $950 million loan for a Cerberus Capital joint venture on
51 hotels formerly owned by Innkeepers USA. The floater will likely be carved
into a $600 million senior piece and a $350 million mezzanine portion. The bank
will securitize the senior portion in a stand-alone commercial MBS deal that
could hit the market next month. The mezzanine debt will be placed with
high-yield investors. Cerberus and its partner, Chatham Lodging of Palm
Beach, Fla., originally sought $850 million, but found banks that were willing
to lend more. When they wanted $850 million, the market for the loan was
very deep, said one veteran lender. When they raised it to $900 million, and
then $950 million, the market got thinner and thinner. The status of the
mezzanine debt was unclear this week. CMBS lenders who competed for the
assignment presumed that J.P. Morgan wouldnt commit to providing such a large
chunk of subordinate debt unless it already had buyers lined up. But some
mezzanine investors said they had been told by the bank this week that all of
the subordinate debt was still available. One high-yield investor said the
frothy mezzanine-lending market made it possible for the Cerberus team to get
a bigger loan. There are too many mezzanine players competing for too few
loans, he said. The 51 hotels, with 6,847 rooms, were among 64 that the
Cerberus joint venture bought from bankrupt Innkeepers in 2011 for $1 billion.
Innkeepers was formerly owned by an Apollo Global affiliate. When Apollo...
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CMBS Pros Forecast Upturn in Bond Values
Traders and investors are optimistic that commercial MBS values will rise by
yearend, but they dont expect a return to the post-crash peak seen in January.
New-issue spreads on the benchmark bonds from multi-borrower offerings should
tighten by about 30 bp during the second half, to 95 bp over swaps, according
to the average forecast of industry pros surveyed by Commercial Mortgage Alert.
The prevailing spread on new long-term, super-senior CMBS was 120 bp as of
June 30, according to Trepp, and the two most recent conduit issues priced at
spreads of 122 bp and 128 bp. The current level remains in that range, industry
professionals said this week. After starting out the year at 72 bp, the
benchmark spread climbed into the low 90s before dropping again in mid-April.
It then swelled by about 40 bp over the past two months to its widest level in
a year. That coincided with soaring yields on 10-year Treasurys, which stood at
2.6 yesterday. Both trends reflected a broad-based pullback by fixed-income
investors amid concerns that the Federal Reserve might soon curtail its
bond-buying program and other efforts to keep interest rates low. All 12
survey respondents foresee a gradual tightening of the benchmark CMBS spread
over the next few months as buyers shake off their recent aversion to long-term
investments which several forecasters blamed on overreaction to public
statements by Fed chairman Ben Bernanke. A lot of that selloff was overdone.
It was a knee-jerk response to Bernankes comments, said Kevin Benson, a...
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