Boston’s John Hancock Tower, New England’s tallest building, was sold Tuesday in a foreclosure auction held by an investor group for $660.6 million, half the price paid by real-estate private-equity firm Broadway Partners three years ago.
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The winning bidder was a partnership between Normandy Real Estate Partners and Five Mile Capital Partners, which holds the senior portion of $700 million in so-called mezzanine debt, or the part that fills the gap between the first mortgage and a borrower’s equity. The partnership agreed to pay $20.1 million for the mezzanine debt and assume the first mortgage of $640.5 million. The Normandy-Five Mile team has bought pieces of the mezzanine debt at discounted prices since June 2008. The debt was originally made by Greenwich Capital, which is part of Royal Bank of Scotland Group PLC, and Lehman Brothers Holdings Inc.
The auction, which some participants described as a “non-event” and lasted only a few minutes, reflects a steep decline in commercial-property values as the economic distress sweeps through office buildings, shopping malls, hotels and the like. The investor group moved to conduct the foreclosure auction after Broadway defaulted on the mezzanine loan, which came due in early January.
Unless other creditors or Broadway Partners go to court to try to block the foreclosure, the Normandy-Five Mile partnership will take over the building immediately. People familiar with the matter said a court fight is “highly unlikely.”
The Normandy-Five Mile partnership also won the bidding for one other office tower controlled by Broadway Partners in Southern California, called 10 Universal City Plaza near Los Angeles. Their winning offer was about $304.9 million.
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