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Thursday, 26 April 2012

$300Mln CMBS Loan on Brooklyn, N.Y., Complex Gets Split Into A-B Notes

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Commercial Real Estate Direct Staff Report

The $300 million CMBS loan against the Bush Terminal, a 6 million-square-foot mixed-use complex in Brooklyn, N.Y., that has been delinquent since 2010, has been modified into two notes.

The loan was comprised of a $250 million note that was securitized through Greenwich Capital Commercial Funding Corp., 2007-GG11, and a $50 million note securitized through Citigroup Commercial Mortgage Trust, 2008-C7. They were set to mature in 2017 and had interest-only coupons of 6.28 percent.

They were moved to LNR Partners, special servicer of the GG11 transaction, in January 2011 after the debt had fallen delinquent.

The 16 properties in the complex, constructed between 1905 and 1930, generated less than $12 million of net operating income in 2010. They were underwritten with the assumption that they'd generate $37.9 million of NOI. Their debt required $19.36 million of annual payments.

The loan's modification, spelled out in a modification template issued by LNR, was highlighted by Credit Suisse in a research report. It calls for the $300 million of debt to be split into two pieces, a $190 million A note that will pay a coupon of 4.68 percent through April 2013, with the difference between the two rates accruing, and a B note of $110 million that accrues, but doesn't pay interest at the loan's original 6.28 percent rate.

The loan's 2017 maturity hasn't changed, but it could be extended by two years in exchange for a fee equal to 1 percent of the A note as well as a $5 million payment that would be used to reduce the B note's principal.

The A note's balance compares with the property's $136 million appraised value as of last January.

The collateral property's owner, a venture led by New York investors Ruben Schron and Abraham Fruchthandler, had to put up $30.4 million of fresh equity, $5 million of which is in the form of a letter-of-credit as part of the modification. A total of $10 million of that went into a reserve account to fund capital expenses at the property and $15.4 million will be used to cover accrued interest payments. The letter-of-credit would be used to cover any potential shortfalls in the capital expense reserve.

The debt can be refinanced after September 2015. In that event, or if the collateral property is sold, proceeds would first be applied to paying down the A note, including accrued interest. Any excess proceeds would be used to provide the Schron/Fruchthandler team a 10 percent compounded return on their additional investment in the property.

After that, proceeds would be used to pay down the B note by $7.5 million if it hadn't been paid down before. Then, they'd go to paying any unpaid interest on the note. If anything is left after that, it would be split evenly between the CMBS trust and the property's owner.

LNR earned a fee of $3 million, or 1 percent of the mortgage's balance, for the modification.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.


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Additional Info

  • Syndicate to Realpoint: No
  • Subject: CMBS - non-deal specific (CMBS-G), Commercial MBS (CMBS)
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Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





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