Hancock Tower sells at half price to Normandy
Güncelleme Tarihi:
PETER S. GREEN
Oluşturulma Tarihi: Nisan 03, 2009 00:00
NEWYORK - Bloomberg - Boston’s John Hancock Tower was sold for $661 million, about half its price three years ago. The sale is a defeat for building owner Broadway Partners and its founder Scott Lawlor. Broadway paid $1.3 billion for the property in 2006
Boston’s John Hancock Tower, New England’s tallest skyscraper, was sold at auction to Normandy Real Estate Partners and Five Mile Capital Partners LLC for $661 million, about half its price less than three years ago.
The companies bid $20.1 million for control of the 60-story building and agreed to assume the $640.5 million mortgage. The sale is a defeat for building owner Broadway Partners and its founder Scott Lawlor. Broadway paid $1.3 billion for the property in 2006 and defaulted on short-term loans secured by the Hancock Tower and other assets last January.
"We will look forward to serving their tenants in keeping with the high standards for which Normandy is known," Normandy and Five Mile said in a statement.
The firms didn’t disclose details of their investment. They previously bought pieces of the defaulted loans, known as mezzanine debt, at discounts in June 2008, putting them in position to foreclose after Broadway defaulted. Mezzanine lenders can sometimes beat rival bidders in foreclosure auctions because the unpaid loan balance due to the mezzanine lender is credited as part of their bid.
The sale price for the Hancock Tower shows how far real estate values have fallen since their peak in 2007. The skyscraper was the crown jewel in Broadway’s $3.3 billion purchase of 10 buildings from Boston-based Beacon Capital Partners LLC in December 2006.
Steve Solomon, a spokesman for Broadway Partners, had no immediate comment. Broadway’s stake in the tower was part of the collateral for $723.8 million in mezzanine debt originally underwritten by Greenwich Capital, a unit of Royal Bank of Scotland Group Plc, and Lehman Brothers Holdings Inc. The mezzanine debt on the Hancock and its adjacent garage was about $472 million.
Mezzanine loans are intended to make up the gap between a first mortgage and the borrower’s equity. Unlike a mortgage, where the bank has a lien on the actual property, a mezzanine loan is secured by a pledge of equity ownership in the borrowing entity that bought the property. That pledge is akin to an indirect claim on the building.
Mezzanine loans also tend to have shorter terms than first mortgages, and are written with the expectation they will be refinanced within five years.
When the loans came due in January 2008, Broadway paid a fee to extend the repayment deadline. As the credit crisis deepened, the firm cut jobs and put assets up for sale to raise cash. By the time the last extensions expired in January, Broadway had nowhere to look for refinancing because loss-ridden banks had mostly stopped making loans amid the financial crisis.
[HH] Los Angeles Property
Normandy today also won the auction for Broadway Partners’ 10 Universal City Plaza in Burbank, California. It was the sole bidder on the property. The bid was $10.1 million and the building has a mortgage of $294.8 million. The 35-story building in Los Angeles’s San Fernando Valley is located next to the Universal Studios Hollywood theme park.
Normandy, based in Morristown, was founded in 2002 by Finn Wentworth and David Welsh, who worked together at Gale & Wentworth, a real estate development firm.
The companies bid $20.1 million for control of the 60-story building and agreed to assume the $640.5 million mortgage. The sale is a defeat for building owner Broadway Partners and its founder Scott Lawlor. Broadway paid $1.3 billion for the property in 2006 and defaulted on short-term loans secured by the Hancock Tower and other assets last January.
"We will look forward to serving their tenants in keeping with the high standards for which Normandy is known," Normandy and Five Mile said in a statement.
The firms didn’t disclose details of their investment. They previously bought pieces of the defaulted loans, known as mezzanine debt, at discounts in June 2008, putting them in position to foreclose after Broadway defaulted. Mezzanine lenders can sometimes beat rival bidders in foreclosure auctions because the unpaid loan balance due to the mezzanine lender is credited as part of their bid.
The sale price for the Hancock Tower shows how far real estate values have fallen since their peak in 2007. The skyscraper was the crown jewel in Broadway’s $3.3 billion purchase of 10 buildings from Boston-based Beacon Capital Partners LLC in December 2006.
Steve Solomon, a spokesman for Broadway Partners, had no immediate comment. Broadway’s stake in the tower was part of the collateral for $723.8 million in mezzanine debt originally underwritten by Greenwich Capital, a unit of Royal Bank of Scotland Group Plc, and Lehman Brothers Holdings Inc. The mezzanine debt on the Hancock and its adjacent garage was about $472 million.
Mezzanine loans are intended to make up the gap between a first mortgage and the borrower’s equity. Unlike a mortgage, where the bank has a lien on the actual property, a mezzanine loan is secured by a pledge of equity ownership in the borrowing entity that bought the property. That pledge is akin to an indirect claim on the building.
Mezzanine loans also tend to have shorter terms than first mortgages, and are written with the expectation they will be refinanced within five years.
When the loans came due in January 2008, Broadway paid a fee to extend the repayment deadline. As the credit crisis deepened, the firm cut jobs and put assets up for sale to raise cash. By the time the last extensions expired in January, Broadway had nowhere to look for refinancing because loss-ridden banks had mostly stopped making loans amid the financial crisis.
[HH] Los Angeles Property
Normandy today also won the auction for Broadway Partners’ 10 Universal City Plaza in Burbank, California. It was the sole bidder on the property. The bid was $10.1 million and the building has a mortgage of $294.8 million. The 35-story building in Los Angeles’s San Fernando Valley is located next to the Universal Studios Hollywood theme park.
Normandy, based in Morristown, was founded in 2002 by Finn Wentworth and David Welsh, who worked together at Gale & Wentworth, a real estate development firm.