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Wednesday, 30 March 2011

Piedmont Moves Forward With Foreclosure Against Chicago Office

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Commercial Real Estate Direct Staff Report

A foreclosure auction for 500 W. Monroe St., a 973,000-square-foot office building in Chicago owned by Broadway Partners will take place tomorrow at the law offices of Allen & Overy in New York.

Piedmont Office Realty Trust Inc., which holds two mezzanine loans that it carries on its books at a value of $61.1 million, had filed to foreclose on its position last summer. But Broadway successfully sued to block the effort. The auction is back on track.

Broadway had purchased the building in 2007 from Shorenstein Properties for $335 million. It turned to Morgan Stanley for up to $340.5 million of financing, nearly $200 million of which was comprised of four mezzanine loans.

A senior $140 million piece of debt is securitized through Morgan Stanley Capital I Inc., 2007-XLF9. Its maturity has been extended to August.

The 44-story building, built in 1992, was about 92 percent leased when Broadway bought it. But GATX Corp., which occupied 13 percent of the property, vacated when its lease matured, making the building unable to meet its debt-service obligation. The building includes a 1,300-car garage. It was on track to generate $14.7 million of net cash flow last year, according to servicer data compiled by Realpoint.

The mezzanine debt, which is technically backed by ownership interests in the Broadway affiliate that owns the building, is held by Piedmont, of Atlanta, CIT Group of Livingston, N.J., Washington Real Estate Holdings of Seattle and Transwestern Investment of Chicago, which also manages the property.

Piedmont is technically foreclosing on the second of four mezzanine loans, which indicates that the other lenders, as well as Broadway's equity position, have been wiped out.

According to a regulatory filing by Piedmont, Broadway had defaulted on the most junior mezzanine loan, which is believed to be held by Transwestern, in early 2009. But Transwestern and Broadway reached a forbearance agreement.

The entire debt stack had matured last August. That's when Piedmont filed to foreclose.

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


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Additional Info

  • Syndicate to Realpoint: No
  • Cities: Chicago
  • States: Illinois
  • Sector: Office
  • Subject: Bankruptcy/Foreclosure (BKRPT)
Read 362 times Last modified on Monday, 04 April 2011
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