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The Next Shoes To Drop In Commercial Real Estate - Part 2
Continuing our series of impending Commercial Real Estate debacles (click for part one), today we focus on CMBX 3 (H1 2007 transactions). As Fitch disclosed on Friday, the November delinquency rate across CMBS increased by 43 bps to 4.29%, while more than double, 9.16% of the entire Fitch universe, was in special servicing. Of this CMBX 3 (together with 4) hold the brunt of the collapse in CRE. Of the 25 deals in CMBX 3, those performing the worst as of the latest remittance report were:
- COMM 06-C8, with 18.3% of all deals delinquent or in special servicing ($680.4 million of $3.7 billion total)
- CSMC 07-C1, with 16.5% of all deals delinquent or in special servicing ($552.3 million of $3.3 billion total)
- LBUBS 07-C1, with 15.6% of all deals delinquent or in special servicing(576.4 million of $3.7 billion total)
And highlighted below are the properties most indicative of the CRE collapse within CMBX 3, and in CRE in general. Once again, this is merely a sample with many other properties already in foreclosure and/or delinquency.
9 West 57th Street, New York (Private Equity/Hedge Fund Central: Apollo, KKR, Silver Lake, Highland, Highbridge, Och-Ziff, as well as MBNA, Cendant, and Avis Budget)
1. CMBX 3 deal: CD 07-CD4
2. Current loan balance: $400 million, matures February 2014
3. DSCR: 1.62
4. Square Footage: 1,609,085 sq. feet
5. Occupancy: N/A
6. Loan comes out to $248.59/sq. foot
7. Watchlisted
8. Servicer Watchlist Comment: (11/01/2009) - if using the March NOI and a 7% cap rate, the value would be $490mm. the loan would be at 80% LTV, with a DSCR of 1.13 at 6.5% rate and 30 year am. but would still be able to be taken out in 2012 given the quality of the asset.
ZH commentary - with the recent BofA vacancy of a major portion of the building, resulting from the firm's move to Bryant Park 2, the property is currently seeking to replace major the vacant space. If Apollo's troubles with its P/E portfolio and Calpers escalate, look for major new vacancies to develop.
9.BarCap estimated loss: N/A
777 Tower, Los Angeles, California
1. CMBX 3 deal: BACM 06-6
2. Current loan balance: $305 million, matures October 2011
3. DSCR: 1.22
4. Square Footage: 1,007,651 sq. feet
5. Occupancy: N/A
6. Loan comes out to $270.93/sq. foot
7. Watchlisted
8. Servicer Watchlist Comment: (08/01/2008) - Loan is secured by a 1,007,651 sf office property in Los Angeles, CA, built in 1990. The Q2-2008 financials have been received and and analyzed. Q2-2008 NCF DSCR is 1.26 with an occupancy of 95%. Loan will be removed from the watchlist with Aug 2008 reporting. Collateral includes a 52-story office tower plus a 4-level underground parking deck with 137 spaces, and a nearby 13-story parking garage with 2434 spaces (in which the subject has a condominium interest in 933 stalls). At U/W, Base Monthly Rent was $35,020,327.55, and NCF DSCR a 1.21x with 88.1% Occ. Rent abatements and concessions have continued to burn off as the loan seasons, resulting in improved DSCR. The loan was placed on the watchlist as a result of a 3/31/2007 NCF DSCR of 1.06x (12.4% decline from U/W) with 90.4% Occupancy. Based on Annualized Q1-2007 figures, the DSCR decline at Q1-2007 is attributed to the following: EGI is a 6.1% decline from U/W, and also a 1.6% increase since YE-2006, while Payroll & Benefits have increased 23.9% since YE-2006, and General & Administrative Expenses rose 6.8% from PYE. The resulting NCF is a 14.2% decline from U/W, but also a 8.9% above PYE.
9.BarCap estimated loss: 30
The Belnord, New York
1. CMBX 3 deal: JPMCC 06-LDP9
2. Current loan balance: $375 million, matures November 2016
3. DSCR: 0.54
4. Number of Units: 215
5. Occupancy: N/A
6. Loan comes out to an insane $1,744,186/unit
7. Watchlisted
8. Servicer Watchlist Comment: (11/01/2009) - DSCR fails to meet the minimum threshold as required by the CMSA. Low DSCR is attributable to below market rents, as a result of rent control, and higher than expected operating expenses, specifically Payroll and Real Estate Taxes. The subject property is mixed use with predominantly residential apartments located in downtown New York City on Broadway next to Central Park. The retail units include The Gap, Club Monaco, CVS, and P.C. Richard & Son. Per U/W assumptions, the rent controlled units will eventually roll to market rents with expected stabilization in April of 2012.
9.BarCap estimated loss: 55%
Hotel Gansevoort, New York
1. CMBX 3 deal: MLCFC 07-5
2. Current loan balance: $124 million, matures March 2017
3. DSCR: 0.84
4. Number of Units: 187
5. Occupancy: N/A
6. Loan comes out to $663,286.90/unit
7. Watchlisted
8. Servicer Watchlist Comment: (11/01/2009) - HVS projects NYC hotel recovers at $600k/key by 2015. At this level the hotel would still suffer 20% loss assuming just extension, with no advancing. The loan would amortize to 109.5mm. jw12.09: the trend is up, kept the current extension scenario.
9.BarCap estimated loss: 25%
Peachtree Center, Atlanta, Georgia
1. CMBX 3 deal: GCCFC 07-GG9
2. Current loan balance: $207.6 million, matures July 2012
3. DSCR: 0.72
4. Square Footage: 2,548,655 sq. feet
5. Occupancy: N/A
6. Loan comes out to $81.45/sq. foot
7. Watchlisted
8. Servicer Watchlist Comment: (11/01/2009) - 11/6/2009 - Peachtree Center located in Downtown Atlanta, Georgia. The collateral includes four class-B office buildings totaling 1,468,514 sf, two class-B+/A- office towers totaling 946,115 sf, three parking garages, and a 134,024 sf retail center. The 2.5 million sf center spans three blocks along the east side of Peachtree Street. The overall collateral package is subject to 12 separate ground leases to various trusts. The collateral consists of the fee mortgage on two office buildings, and a leasehold mortgage on four office buildings (the "4-Pack" - Harris, International, North, and South Towers), three garages and the retail shopping mall. The property has experienced negative absorption of approximately 660,000 sf during the past three years leading to loan origination. The project had an overall average occupancy of 65.5% at origination. To mitigate the vacancy, $26.6 million was held back as a leasing reserve, $8.6 million for a debt service reserve and $9.3 million for a capital improvement reserve. The balances of these reserves at 11/6/2009 are as follows: Capital Improvement $2.65 million; Debt Service $6.8 million; Leasing Reserve $10.9 million. Leasing Updates: Deloitte Consulting 127,221 SF (5% of total SF of collateral) is vacating its space on 8/31/2009 to consolidate operations elsewhere. Deloitte is obligated to pay its rents (& additional rents) thru its entire lease (2012) unless a termination is agreed upon. A lease for 252,822 (10%) has been signed for Suntrust, on of the nation’s largest banks. This lease has also been approved by the lender. GSA Nuclear Regulatory has renewed their lease of 101,528 SF until 8/31/2024, and a lease for Fulton County for 46,600 SF (1.8%) is currently on the table
9.BarCap estimated loss: 20%
75-101 Federal Street, Boston
1. CMBX 3 deal: MSC 07-IQ13
2. Current loan balance: $210 million, matures February 2017
3. DSCR: 0.83
4. Square Footage: 811,687 sq. feet
5. Occupancy: 80.5%
6. Loan comes out to $258.72/sq. foot
7. Watchlisted
8. Servicer Watchlist Comment: (09/01/2009) - This collateral consists of two interconnected towers totaling 811,687sqft: 75 Federal Street is a 21-story office building and 101 Federal Street is a 31-story building with 196 car parking garage. The property was U/W with NCF DSCR 1.05x and 91% occupancy based upon stabilization. Q1 09 DSCR 0.82x with 80.5% occ and YE 08 0.64 with 80.3% occ remains below threshold. Per the borrower, the property performance will improve once occupancy stabilizes and expense reimbursements are fully recognized and reported.
9.BarCap estimated loss: 20%
John Hancock Tower & Garage, Boston
1. CMBX 3 deal: GCCFC 07-GG9
2. Current loan balance: $640.5 million, matures January 2017
3. DSCR: 1.10
4. Square Footage: 1,751,110/sq. feet
5. Occupancy: N/A
6. Loan comes out to $365.77/sq. foot
7. Watchlisted
8. Servicer Watchlist Comment: (11/01/2009) - 9/7/2009 - The John Hancock Tower is a 1,728,550 sf, 62-story class-A trophy office building that is the tallest office building in New England. One of the most recognizable landmarks in the Boston skyline, the property is located at the center of Boston’s Back Bay district and has unobstructed, 360-degree views of Boston. The JH Complex was built by I.M. Pei in 1972-1973 and extensively renovated in the late1980’s. The Garage at 100 Clarendon Street comprises eights stories and 2,013 parking spaces. Additionally, the parking garage includes 28,024 sf of retail space that is leased to Wainwright Bank and Trust and Harvard Vanguard Medical Associates. The Garage was constructed at the same time the JH Tower was under construction in 1972 and was also designed by I.M. Pei. The Garage is leased to Wainwright Bank and Trust and Harvard Vanguard. Beacon Capital invested significant capital improvements, totaling $10 million (in 2005), to reposition the garage, including state-of-the-art access and revenue control systems, and improved lighting, landscaping, directional signage, and common areas. A $724 million bridge mezzanine loan was issued to help fund the acquisition of the JH Tower and Garage as well as six other office properties. The mezz loan was participated out to several lenders amongst five (5) different tranches. The Mezz Loan went into default as a result of the Borrower’s failure to pay off the Mezz Loan in full at maturity, January 6, 2009. Furthermore, an Appraisal Event caused a change in the Controlling Holder of the mezzanine loan. In February 2009, the mezzanine loan servicer provided its notice to the JH Tower and Garage senior loan Master Servicer of its intent to foreclose on the mezzanine loan collateral via a UCC foreclosure. On March 31, 2009, Normandy/Five Mile, the controlling holder of the mezzanine loan, emerged as the successful UCC foreclosure bidder. The senior lender Master Servicer and Special Servicer worked with the Rating Agggencies to finalize the change in ultimate ownership, manager and guarantor/indemnitor for the JH Tower and Garage. The ownership officially changed in early May 2009 and Normandy/Five Mile is now the new owner and operator of the asset.
9.BarCap estimated loss: 10%
Four Seasons Resort Maui, Wailea, HI
1. CMBX 3 deal: CD 07-CD4
2. Current loan balance: $400 million, matures February 2014
3. DSCR: 0.64
4. Number of units: 380
5. Occupancy: N/A
6. Loan comes out to $657,894.74/unit
7. Watchlisted
8.
Servicer Watchlist Comment: (11/01/2009) - 10/6/09: Four Seasons Resort Maui is a 308 room resort located in an upscale neighborhood in Wailea, HI. The property has recently been totally renovated including rooms, common areas, and spa. The loan is on the WL for low DSCR and EGI. DSCR has continued to decline as Q2 2009 T-12 was 0.64x, lower than the 0.91x Q1 2009 T-12, 1.13x FYE 2008, and 1.33x FYE07. It should be noted that Q2 YTD 2009 occupancy was 59%, down from 81% in Q2 YTD 2008, and ADR was $685 in 2Q YTD 2009, much lower than the $754 rate from the previous year. EGI as of Q2 T-12 2009 was $94.92mm, significantly less than the UW EGI of $126.99mm. Departmental Revenue has continued to decline, while the Operating Expenses have remained relatively steady. There has been significant occupancy and rate deterioration in the Maui market, as well as the Four Season’s competitive set. Borrower indicates that they plan on holding rates/occupancy as much as possible in the coming months by focusuing on continued strong corporate bookings and by differentiating themselves by offering more services to customers as competitors cut back drastically. We are in the process of springing a Lock Box, and will continue to monitor the property.
9.BarCap estimated loss: 60%
Four Seasons Hotel, Los Angeles, CA
1. CMBX 3 deal: MSC 07-T25
2. Current loan balance: $72 million, matures December2016
3. DSCR: -1.07
4. Number of units: 285
5. Occupancy: N/A
6. Loan comes out to $252,631/unit
7. Watchlisted
8.
Servicer Watchlist Comment: (11/01/2009) - comp vs ritz carlton jan 08 421k per key, this should be better quality, but much worse environment.
9.BarCap estimated loss: 60%
720 Fifth Avenue, New York (Abercrombie & Fitch Building)
1. CMBX 3 deal: CSMC 06-C5
2. Current loan balance: $192
3. DSCR: 1.33
4. Square Footage: 121,108
5. Occupancy: 84.9%
6. Loan comes out to $1,362.42/sq. foot
7. Watchlisted
8.
Servicer Watchlist Comment: (10/01/2009) - 10/8/2009 In contact with the borrower regarding updated financial statements. The borrower is currently in talks with the accounting firm that does their statements. The borrower has not received any data for 2009 and is trying to work something out with the accounting firm. 9/30/2009 This loan has a replacement reserve with a monthly constant of $2,246.53 and a balance of $77,241.97 and a tenant improvement/leasing commission reserve with a monthly constant of $10,416.67 and a balance of $41,697.15. Lender approval is required for leased space greater than 7,500 sf (6.2% NRA). 8/7/2009 This property is a mixed use property. The property consists of both retail and office spaces. The first four floors are retail floors and the remaining floors are office floors. Per borrower reports this property has an average rental rate of $127/sf which has decreased from $136/sf in 8/31/2007. 8/7/2009 Occupancy in August 2007 was 77% then increased to 84% in August 2008 to 84.9% due to the tenant Spirla (6,162sf, 5.1% NRA, 3.2% EGI, $67/sf) adding an additional (1,998sf, 1.6% NRA, 1.2% EGI, $79/sf). Tenant Wholesale occupied (2,448sf, 2.0% NRA), and tenant Christofferson & Robb (4,757sf, 3.9% NRA, 2.5% EGI, $72/sf) added additional square footage (6,365sf, 5.3% NRA, 4.2% EGI, $91/sf). 8/7/2009 Then occupancy increased to the current percentage due to the tenant Abercrombie and Fitch (64,953sf, 53.6% NRA, 81.2% EGI, $174/sf) added an additional (9,189sf, 7.6% NRA, 4.2% EGI, $64/sf). 5/11/2009 NCF DSCR declined due to gross income decreasing 7% ($16,003,900-$14,950,000) from underwriting but an increase of 14% from 2007. Gross income declined due to base rent declining 13% ($14,709,000-$12,843,000) from underwriting but an increase of 4% from 2007. Operating expense increased 27% ($3,682,000-$4,666,000) from underwriting and 4% from 2007. The increase in operating expense is due to utilities increasing 98% ($482,000-$955,000) from underwriting and 9% from 2007. 4/1/2009 In the inspection dated 10/2008 there were three floors that were under renovation. Per the borrower, the sixth and ninth floor have been renovated and are occupied by tenants, and the seventh floor has been renovated but is vacant. Per the borrower the building as a whole is doing well compared to the market. The borrower is currently asking for around $130/sf for the vacant floor and is marketing it through a brokerage firm. [good luck] 3/10/2009 Per the borrower, the building is an old building the repairs and maintenance being done on the property is normal maintenance upkeep. The property’s utilities have increased due to New York City utility rates increasing.
9.BarCap estimated loss: 15%
W Hotel Union Square - New York
1. CMBX 3 deal: CSMC 06-C5
2. Current loan balance: $115 million, matures October 2011
3. DSCR: 1.08x
4. Number of units: 270
5. Occupancy: N/A
6. Loan comes out to $425,925.93 per unit
7. In foreclosure
Servicer Delinquency Comment: (10/01/2009) - 10/16/2009 Per LNR This loan was transferred to SS on 9/28/09 for Imminent default due to cash flow problems. The next payment due date is 10/11/09. The most recent property inspection is dated 12-3-08 stated that there were no deferred maintenance issues or health an d safety concerns noted during time of inspection. The property is in good overall physical conditions.
Servicer Watchlist Comment: (09/01/2009) - 9/9/2009 Per the borrower, the hotel market in New York is down from last year because fewer people are traveling due to the state of the national economy. The borrower stated that the room rates are down almost $100 from last year which was a major cause for the decrease in income. The rates are down for all hotel properties in the New York market area. The borrower is currently appealing the increase property taxes. The borrower advertises the hotel through the use of internet. 8/31/2009 There is a Seasonality Reserve with a balance of $868,666.60 and no monthly constant. 8/31/2009 A "Lender Cash Control Period" will trigger if one of the following periods occur: (i) the period during which Manger is in Control of the Owner and an Event of Default has occured and is continuing, or (ii) the period from and after the effective termination date of the Management Agreement. 8/31/2009 This is an interest only loan for the life of the loan. Total debt service figure decreased 51% ($15,061,000-$7,444,420) from underwriting and decreased 0.3% ($7,465,000-$7,444,000) from December 2008. 8/31/2009 Per borrower reports, occupancy for the subject property in June 2007 was 92.59% with an ADR of $461.57 and a REV Par of $426.92. Occupancy percentage decreased to 88.15% in June 2008. In June 2008 the ADR was $469.46 and the REV Par was $413.78. Occupancy then increased to the current percentage with an ADR of $312.10 and a REV Par of $291.25. 8/31/2009 NCF DSCR decreased from underwriting due to a decrease in gross income of 18% ($46,840,000-$38,232,000). Income decreased due to a decrease in room revenue of 16% $35,480,000-$29,894,000). Operating expenses increased 1% ($28,155,000-$28,339,000). Expenses increased due to an increase in property taxes of 212% ($969,000-$3,023,000). Property taxes increased due to the city of New York increased property taxes for all properties to make up the deficit in the 2009 city budget. 8/31/2009 NCF DSCR decreased from December 2008 due to a decrease in gross income of 20% ($37,660,000-$29,894,000). Income decreased due to a decrease in room revenue of 21% ($37,660,000-$29,894,000). Expenses decreased due to a decrease in general and administrative expenses of 14% ($4,039,000-$3,484,000).
Property acquired by LEM in foreclosure auction for $2 million
9.BarCap estimated loss: 45%
Central Valley Investments (CVI) Portfolio - Citrus Valley, Sacramento, CA
1. CMBX 3 deal: CSMC 07-C1
2. Current loan balance: $180 million, matures November 2011
3. DSCR: 1.00x
4. Number of units: 2,990
5. Occupancy: N/A
6. Loan comes out to $60,128.09 per unit
7. In foreclosure
8. Servicer Delinquency Comment: (11/01/2009) - 11/5/2009 - Loan transferred 4/17/2009 due to imminent default. Loan is due for 9/2009 payment. Three additional mezzanine loans exist, which are also in default due to the interest reserve being exhausted. Collateral for the loan includes 20 multifamily properties located in 7 states throughout the U.S. Foreclosure has been initiated and a reciever was appointed in August 2009. Guarantor was released under the first mortgage after it provided an agreed payment to Lender and consented to a receivership. Broker opinions of value have been received. Appraisals have been ordered.
Servicer Watchlist Comment: (04/01/2009) - The CVI Multifamily Apartment Portfolio is secured by 20 properties totaling 2990 units Multifamily property located in Sacramento, Various. This whole loan consists of 1 A-Note(s) for 179.78mm, 1 Mez note(s) for 68.19mm for a total of 247.98mm. This loan is currently marked as proforma. The stabilized DSCR NCF 1.35x was reported in the annex vs. As-Is 1.00x UW DSCR NCF as compared to 1.01x for YE07 and 0.99x as of 3/08. There are 4.39mm in debt service reserves as of 2/09.
9.BarCap estimated loss: 45%
Savoy Park, Harlem - New York
1. CMBX 3 deal: CSMC 07-C1
2. Current loan balance: $210 million, matures January 2014
3. DSCR: 0.65x (Pro Forma loan: comparable to Stuy Town: expected unlocking of rent control/stabilized units)
4. Number of units: 1,802
5. Occupancy: 96%
6. Loan comes out to $116,537.18 per unit
7. Watchlisted
8. Servicer Watchlist Comment: (11/01/2009) - 1E - DSCR Below Threshold. This loan is secured by seven apartment complexes with a total of 1,802 units built in 1959 and renovated in 2005. The combined DSCR and occupancy for the six months ended 06/30/09 was 0.65x and 96%, respectively. The combined DSCR and occupancy for the year ended 12/31/08 and at contribution was 0.54x and 95% and 1.46x and 97%, respectively. The current balance of the debt service reserve is $2,013,593.76 as of 11/13/09. According to the borrower’s operating statements, there were 483 market rate tenants at the end of 2008, which included 74 vacant units. The average market rent was $1,783. Rent Revenue was negatively affected by greater than expected vacancy and leasing commissions. The property was budgeted for 25% broker deals, but experienced 65% actual broker deals. Fewer units were renovated than anticipated. There were 135 apartments renovated in 2008 versus the 182 units that were budgeted, at an average budgeted cost of $31,000. Electrical expense increased during the summer due to higher usage caused by additional air conditioners that were installed by the residents. The borrower plans to control this expense with an electrical sub metering system. Work on the infrastructure and the apartment installations began in June of 2009. The project is scheduled to be completed in November of this year. Other major capital improvement projects include the replacement of water tanks and the relocation and refurbishment of the parking lot. The properties were last inspected on 06/24/09 and all received ratings of fair. The inspection noted the following items of deferred maintenance: (1) cracked / deteriorated pavement with potholes, pooling water and faded striping throughout the property, some of which pose trip hazards; (2) a leaking Sprinkler Control Valve; (3) water-damaged walls and cooling water on the roof; and (4) graffiti. Capmark will continue to monitor the loan. 1E - DSCR Below Threshold.
9.BarCap estimated loss: 50%
City Place Mall, West Palm Beach, Florida
1. CMBX 3 deal: CSMC 07-C1
2. Current loan balance: $150 million, matures October 2016
3. DSCR: 0.64x
4. 756,471 sq. feet
5. Occupancy: 85%
6. Loan at $198.29/sq. foot
7. Watchlisted
8. Servicer Watchlist Comment: (11/01/2009) - DSCR Below Threshold | 1F - DSCR Decrease. This loan is secured by a 756,471 sf mixed-use complex built in 2000 consisting of retail space, 56 loft style office spaces and 54 residential units. The DSCR and occupancy for the six months ended 06/30/09 was 0.64x and 85%, respectively. The DSCR and occupancy for the year ended 12/31/08 and at contribution was 0.53x and 87% and 1.26x and 95%, respectively. The effects of the weak national economy is especially acute in Florida and is having an impact on all retail centers and retailers in the West Palm Beach market. The weak economy has also stalled the redevelopment of Simon’s Palm Beach Mall; and reportedly, Simon is considering selling the property. Despite these bleak macro influences, the borrower indicated that City Place has been able to hold up well. The lease rates and occupancy costs at the property have remained flat. Since the first quarter, the few store closings have been offset by store openings -- which are keeping occupancy relatively stable. Furthermore, the borrower advised that the subject’s occupancy will rise to 94% with the inclusion of signed leases for Victoria’s Secret, Bath & Body Works, and McCormick and Schmick’s. Additionally, the borrower noted that the lofts are continuing to lease as small office suites despite a struggling Class "B" office market. Occupancy is currently at 75% for the lofts, and the City Place team is working diligently to offer incentives for new tenant referrals. The flats, the rental residential product located above the retail space, have a current occupancy of 94%. The property was last inspected on 05/21/09 and received a rating of good. Capmark has contacted the borrower for a property performance update and is awaiting a response.
9.BarCap estimated loss: 30%
Westin O'Hare, Rosemont, IL
1. CMBX 3 deal: MSC 06-IQ12
2. Current loan balance: $101 million, matures December 2016
3. DSCR: 0.48x
4. 525 units
5. Occupancy: N/A
6. Loan at $192,380.95 per unit
7. In Special Servicing
8. Servicer Delinquency Comment: (11/01/2009) - Loan was transferred to special servicing on 6/19/09, due to imminent default when the borrower stated it would be unable to continue to fund the shortfalls. The loan is paid through the September 8th payment. YTD through 5/31/09, the borrower has funded $2.2MM in operating and debt service shortfalls. Borrower is asking for debt service relief during the market downturn. As of 9/30/09, YTD occupancy has averaged 59%, compared with 71% in 2008, and RevPar has fallen to $66 vs. 2008’s $104, and YTD NOI is $756,000. DSCR is .17 X. The loan is subject to a cash management agreement, but the management company is only required to deposit net profits into the account. Due to poor performance, no deposits have been made since the loan has been in special servicing. Counsel has been engaged, and a prenegotiation letter signed on 7/20. The management company was not escrowing for insurance or taxes, and the Special Servicer required deposits to be made to balance the escrows. The 10/8/09 debt service payment was received, but borrower did not fund the required escrows. A forbearance agreement was signed in order to give the borrower and its new restructure firm time to submit a revised proposal, which is was received 11/2/09. BOV’s have been obtained, an operational analysis by an outside expert is complete, and an updated appraisal was received. Special Servicer is evaluating the borrower’s proposal.
Servicer Watchlist Comment: (06/01/2009) - 1E - DSCR Below Threshold. This loan is secured by a 525 room hotel built in 1984 and renovated between 2002 and 2005. The DSCR and occupancy as of 12/31/08, 12/31/07, and at contribution were 1.10 and 69%, 1.44 and 72%, and 1.46 and 73%, respectively. On 03/04/09, the borrower sent a hardship letter indicating that they will definitely default in making debt service payment due to the significant decline in hotel operations. In January 2009 revenue were down by 46% compared to same-period in the prior year, and January 2009 Net Operating Income was negative $421,000. Borrower projects $1.8M of debt service shortfall in 2009 and indicated that substantial additional funds will be required to complete the room renovations in 2010. On 06/09/09, Capmark contacted the borrower for additional information and is awaiting a response. The property was last inspected on 09/23/08 and received a rating of good. Capmark will continue to monitor the loan.
9.BarCap estimated loss: 60%
21-25 West 34th Street, New York, Site of What was supposed to be New Apple Store, plans recently abandoned
1. CMBX 3 deal: CSMC 06-C5
2. Current loan balance: $100 million, matures December 2016
3. DSCR: 0.84x
4. 27,900 sq. feet
5. Occupancy: None
6. Loan at $3,584.23/sq. foot
7. Watchlisted
8. Servicer Watchlist Comment: (10/01/2009) - 10/12/09 - The DS Reserve has a balance of $833,678. Loan is secured by a to-be-built 27,900 SF (approx.) single tenant building leased to Apple Computer on a NNN lease w/ 15 yr term w/ one (5) yr renewal option. Rental payments under the lease commenced 2/1/07 & the initial 15-year term runs through 1/31/2022. The base rental payments under Apple’s lease increase every 3 yrs throughout the initial 15-year lease term: Lease Yrs. 1-3 $5,565,000 annually; increasing in Lease Yrs. 4-6 to $6,015,000 annually; increasing to $6,510,000 annually in Lease Yrs. 7-9 & increasing to $7,054,500 annually in Lease Yrs. 10-12. Loan was structured with an initial debt service reserve of $1,592,250 to cover the shortfall b/t lease payments (inclusive of the time frame prior to Apple commencing rent payments in 2/2007) & DS payments until the DSCR turns positive after the 3rd lease year. Per the terms of the lease, SL Green (the BRWR/Sponsor) was to raze 2 buildings & Apple is required to construct the 27,900 SF building. As of YE 2007, the demolition had not yet been completed but has been completed as of the date of this writing. Apple is scheduled to begin construction shortly & BRWR is currently working to split one of the parcels encumbered by the mortgage into 2 separate tax parcels in order to enable construction. U/W DSCR per Annex A is 1.04-original underwritten DSCR was based on the AVERAGE rent paid over the 10-year loan term.
9.BarCap estimated loss: 15%
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Excellent stuff...
Hope the CNBC, Bloomberg & FBN lurkers are taking note ..
here is a good video with Sternlicht talking real estate
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/...
It's very interesting how he has moved in on distressed assets (courtesy of the FDIC and taxpayers) http://www.bloomberg.com/apps/news?pid=20601103&sid=aNn_uoGfr1uM
http://finance.yahoo.com/q?s=STWD
and an interesting article from Mish on CRE
http://globaleconomicanalysis.blogspot.com/2009/12/interview-with-commer...
Sorry, I couldn't resist: "In the world I see -- you're stalking elk through the damp canyon forests around the ruins of Rockefeller Center. You will wear leather clothes that last you the rest of your life. You will climb the wrist thick kudzu vines that wrap the Sears Tower. You will see tiny figures pounding corn and laying strips of venison on the empty car pool lane of an abandoned superhighway."
Sorry kudzu does not grow North of Kentuky, Sears tower Chicago, IL.
In the world that Tyler sees, it apparently does: http://www.imdb.com/title/tt0137523/quotes
Not 100% accurate. It is found as far north as Leamington, Ontario which is very near Detroit, far north of Kentucky.
As a scientist , I'm no longer convinced of global warming. I'm not convinced of global cooling either. I am fairly sure that the climate is changing, but I'm also certain that there is no need for any monetary systems to change current behaviors.
Copenhagen is a sham. Cap and trade is a sham. They are hooligans raping the commoners.
That having been said, it's plausible Kudzu will be found growing at the pole regions in 20 years. Or not.
-MobBarley
If the TALF/TANF/WTF buys the CMBX, does that mean that each taxpayer can stay at some of these resorts?
You'll get nothing, taxpayer, and LIKE IT.
I think not, we'll get the maintenance bill
I worked at 9W 57th, nice building. The biggest tennant (BofA securities LLC) left in Aug 08
the private equity guys and so called real estate experts are a bunch of sleezy derelicts. How pathetic.
will any of these guys ever be held accountable for such dereliction?
Wow... I'm putting some of these on my Christmas wish list... maybe it's time to go lowballing again!
Make sure then to include the Four Seasons in Maui :-)
Do they even have 4 seasons in Maui? More like one season probably... warm season. Just like Minnesota has 2 seasons... Mosquito and Winter.
LOL... yep that's about right... those are our two seasons in Minnesota :-) That's why that one 'warm season' in Maui sounded great out of all the 16 distressed CRE properties listed... didn't want you to get confused and put the Westin in Rosemont, Illinois on your Christmas wish list :-)
The light at the end of the tunnel is getting closer. Then the " oh shit " moment, then boooommm...
Whaddaya goin to do now Ben? Welcome back.. To hell..
Whaddaya goin to do now Ben?
the answer is easy: Of course bail them out with a few more trilion $ !
Exactly. I've heard " next shoe to drop " for what seems like forever, now.
all the shoes dropped long time ago, you are going to wait in vain. Presses printing, markets going higher.
Well, just tells you that the shoe factory must be pretty busy :)
It's been raining shoes for quite a while now... need something bigger. Iran?
or a headline that says the tali, al q critters got themselves a couple of nukes from Paki. that one is one of my black swans.
Of course we are well familiar with most of these issues. Most of these deals were possible I asume because of public pension funding and corporate excess capital ventures(GE for example). Two changes I am thinking of and I want to present them to the legal professions experts that frequent here. 1-No more shielding of personal assets from corporate liabilities,at least for the exutives who are in decision making positions. The only shield will be for a reasonable residence(indexed to the lower of a pricing rang in the area of the primary residence of the executive). 2-For any corporation that recieves capital from another corporation,the giving corporation becomes liable for the same perentage of liabilities of the recieving corporation.(if corporate a gives corporate b 20% of its capital to be invested in say a building in the middle of the Atlantic ocean,then corporate a becomes liable for 20% of the debt that corporate b will be able to leverage). What do you think?
"Special Servicing".
"If the TALF/TANF/WTF buys the CMBX, does that mean that each taxpayer can stay at some of these resorts?"
That just reminded me of something. After the fall of goverment in Iraq, A lot of people who happened to be in the wrong neighberhood,or just didn't have their own homes,moved to all empty goverment buildings. And since the goverment has gone into a building binge in the seventies modeling the USSR different unions and party organisations,there was no shortage of these buildings...
Hey Tyler, you forgot the juicy part on each property.
How much "cash out" was taken by the borrowers? And how does the loan balance compare to the borrower's purchase price?
Funny part is, most of these sponsors of the "borrowers" already scraped their equity out, and have no capital at risk.
So now the lenders have no choice but to "Extend and Pretend" ad infinitum.
Until some vulture comes around and offers an all cash deal to pick the property up at 50% off....
LOL...
Hey RobotTrader... now you are on my turf...
Yes I've personally seen deals financed at over... wait for it... 300%+ of sale price so the likelihood of the shenanigans you mention is a real possibility.
That said... no self-respecting vulture is going to offer 50%. We would wait a couple more years perhaps to let the fruit ripen and start at ten or twenty.
Just Sayin'
$600 / key for hotel Gansevoort. That is CRAZY !
300 / key; maybe $400. The rest is toast.
9 W 57th St ... vacancy or no; I would not worry about a $250 psf loan there. Property would likely sell for 600-1000 psf.
W 34th Street -- Apple store bldg was built. Not Apple but a fashion subtenant. This info is very stale. Go to SLG Investor Day presentation for more detail about this site.
Whew. Thank goodness interest rates are starting to rise.
A funny thing happened on the Recovery Road....someone forgot to tell the banksters that all those pretty buildings with all those pretty loans taken out by all those newbies in CRE might just implode.
2010 will be ugly and the regional banksters will be the trigger along with SWF's barfing billion dollar hairballs.
Ack ! thbbbt !!!
http://i.ehow.com/images/GlobalPhoto/Articles/4672052/89418-main_Full.jpg
With a full-blown CRE implosion now all but CERTAIN, can someone explain WHYYYYYY this administration is allowing banks to suddenly all pay back their TARP funds??
What in the hell is going on here?
Its all show..."It was a success..it's all fine now....they are repaying TARP, go to the mall and increase your 401K Contribution ..."
tarp is a small part of the bailout they have received. after paying it back, when the next wave hits, they can justify an even bigger tarp, by saying, they paid it back last time. they're good for it. and in the meantime, tarp restrictions, won't interfere with bonuses
Major U.S. apartment owner & developer Fairfield Residential LLC files for bankruptcy - WSJ
Help me out here, I don't know anything about this stuff ... Does this mean that, say, the ANF store (720 5th Ave) is likely to come on the market soon as a distressed sale or is it the loan that will come on and the property is the collateral. Can somebody accumulate the securities in an effort to acquire the building?
Any info appreciated.
Thanks.
DECEMBER 14, 2009.Fairfield Files for Chapter 11
By MIKE SPECTOR And LINGLING WEI
Fairfield Residential LLC, one of the nation's largest apartment owners and developers, filed for bankruptcy on Sunday, the latest casualty of the turmoil engulfing the U.S. real-estate market.
Fairfield, which has built some 64,000 apartments, condominiums and off-campus student-housing units throughout the country, failed amid an inability to refinance debt or sell investment properties. That left the private San Diego, Calif., company with a litany of near-term maturities on debts related to various development projects and other investments.
Fairfield filed for Chapter 11 late Sunday afternoon in Delaware and listed assets of $958 million and liabilities of $834.9 million as of the end of September. In addition, Fairfield noted that many of its properties are worth less than their loan balances. That contributed toward putting Fairfield in violation of certain financial covenants with two main lenders: Wells Fargo & Co.'s Wachovia and Capmark Financial Group Inc., the big real-estate lender that recently filed for bankruptcy itself.
In addition to development, Fairfield also buys and sells real-estate assets, including the Milano in Torrance, Calif., and a sale of the Castlegate apartment complex in the Washington, D.C., suburbs. It acquired $7 billion of apartments over the past seven years, and has sold more than $12 billion of real estate since 1997.
Fairfield's bankruptcy is the latest example of a soured commercial real-estate bet made by Morgan Stanley's series of property funds, known in the industry as MSREF. Fairfield and a fund called MSREF II joined forces to form Fairfield Residential in 1997.
Morgan Stanley's family of funds was among the most aggressive buyers of real estate during boom times. Now, many of its top-of-the-market deals are suffering from plummeting values, declining rent rolls and scarce financing.
http://online.wsj.com/article/SB1000142405274870412150457459447424492819...
CRE analytics provided by the guy who didnt know how to calculate a cap rate. Thank god for the control C and control V analytics tools at ZH headquarters...
Fairfield blows up! This ought to get some CRE attention tomorrow. http://online.wsj.com/article/SB1000142405274870412150457459447424492819...
Yes here in Wonderland we should see a nice Bankruptcy driven rally tomorrow...this is worth at a 1% gain....
"If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn't. And contrary wise, what is, it wouldn't be. And what it wouldn't be, it would. You see?” - Alice in Wonderland
Nice bankrupycy rally...drv down 4%
http://www.google.com/finance?client=ob&q=NYSE:DRV
yet, somehow SRS will go down tomorrow
With the Fed pushing banks to re-work CRE loans most of this will get pushed under the rug until the govenment finds a use for the buildings.
The worse the news the greater the rally in the real estate sector...
http://www.google.com/finance?client=ob&q=NYSE:DRV
Does SRS track commercial real estate? It has slowly moved lower and lower while all of this has been happening... What gives?
I'm sure you all have seen this:
http://www.businessinsider.com/somethings-fishy-tishman-speyer-and-ny-fed-discuss-chicago-cre-debt-2009-12
This is why I'm afraid we won't see any CRE trainwreck - the Fed will print it's way out through secret bailouts. What's another $1.5T? Of course the small banks won't be helped - the FDIC will shut them down while the big boys get Bernanke bucks.
The Fed has to be brought under contol..we are going to have a nation of bankrupt zombie banks and corpse buildings that are vacant that can't be sold or leased because they are artifically propped up by the Fed..its the Japan lost decade coming our way...
We already have lost a decade (the naughts), I'd say we're looking at a lost generation.
the government will just have to bail out all CRE, and then hire new federal employees, to work in these bldgs. finance, and unemployment fixed, with one program. ( If you read this obama, it's a joke, please don't do it )
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Interesting sheriff auction in MN..
Brooks Mall Properties and Capmark
http://www.startribune.com/local/north/79108037.html?elr=KArksUUUoDEy3LG...
WTF?!?!?!?
Something very sinister is going on here. WHY is this administration allowing these insolvent banks to pay back billions in tarp money when we ALL KNOW trillions in losses for both residential and commercial RE are right around the damn corner?!!!
OBAMA!! We are not going to give them another dime when the shyytt hits the fan the next time around.
Looks like 720 Fifth Ave has a bulge in it. The Servicer comments on that building are hilarious.
This has been the same record since Feb...
http://seekingalpha.com/article/119236-commercial-real-estate-bubble-is-set-to-burst
had you purchased srs when this warning came out your would only be down 85%