Region’s largest office landlord gets $2.7 billion loan modified
The Seattle area’s largest office landlord has reached a deal with lenders and sidestepped default on a mammoth loan it took out in 2007 to buy 20 office towers and complexes, including nine in Seattle and Bellevue.
Boston-based Beacon Capital Partners and the servicer of the $2.7 billion, interest-only loan agreed to modify terms earlier this month after negotiating for eight months.
Some buildings in the portfolio could be sold over the next 17 months as a result of the deal, credit-rating agency Standard & Poor’s said in a short report on the modification.
The nine Seattle-area properties that secure the loan include the 47-story Wells Fargo Center in downtown Seattle and the 27-story City Center Bellevue in downtown Bellevue. The other 11 buildings are in the Washington, D.C., area.
Altogether, the Seattle properties have more than 4.5 million square feet of office space.
Beacon bought all 20 from Equity Office Properties in April 2007, near the office market’s peak. The gigantic loan was split into eight smaller notes that were repackaged with other real-estate loans and sold as commercial mortgage-backed securities.
But the buildings encountered financial difficulty when the recession hit, vacancies rose and rents fell.
At the end of June, the margin between the portfolio’s net operating income and its debt-service costs was just 4 percent, according to reports from the loan’s servicer.
Beacon initiated negotiations to restructure the loan in April. According to servicer reports, it informed lenders it might not be willing to pour any more of its money into leasing or improving the buildings unless a deal could be worked out.
The loan was transferred that month to a “special servicer” that deals with troubled debt because default “was considered likely within 60 days,” according to the servicer, C-III Asset Management of Irving, Texas.
Beacon didn’t default, continuing to make monthly interest payments while the debt was renegotiated.