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Tuesday, 15 October 2019

CMBS Trust Takes Fireman's Fund Complex, Bringing $190.3Mln Loan Closer to Resolution

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Commercial Real Estate Direct Staff Report

GE Commercial Mortgage Corp., 2005-C4, has taken over the three-building Fireman's Fund office complex in Novato, Calif., through a deed-in-lieu of foreclosure.

The action was expected as the vacant complex' former owner, a venture of GE Pension Trust and American Assets Trust Inc., had trouble finding tenants for the 710,330-square-foot property at 775-779 San Marin Drive.

But it complicates matters and likely will result in certain bond investors getting shortchanged.

The property originally had been encumbered by a total of $190.3 million of CMBS debt. The GECMC 2005-C4 deal held what was a $90.3 million note and Banc of America Mortgage Inc., 2005-5, held the balance. The BACM deal sold its loan piece, which was pari passu with the GECMC loan piece, meaning both had equal rights to cash flows and recoveries. That piece, which had shrunk to $56.6 million, was sold to a group led by David Werner Investments for $60.1 million. After fees and advances were repaid, the CMBS deal suffered a loss of nearly $750,000.

Now Midland Loan Services, special servicer for the GECMC deal, will be tasked with liquidating the property. The balance of the loan piece in that deal has shrunk to $51 million. That compares with the property's $58 million appraised value, which was determined last December. But it's likely worth less than that. Morningstar Credit Ratings, for instance, pegs its value at $55.6 million, assuming some of its vacancy gets filled within the next two or three years.

And Kroll Bond Rating Agency expects the property is worth less than $50 million. That assumes a lease-up in five years. The issue is that the property has been vacant for roughly four years and is likely in need of substantial improvements, particularly if it were to be retrofitted to multi-tenant use.

The building, however, served as collateral for both the A1 note in the BACM deal and the A2 note in the GECMC deal, so each deal likely will have to divide whatever proceeds result from the property's ultimate disposition. If that's as little as $30 million, for instance,  each deal will receive only $15 million.

That's exactly what Taconic Capital Advisors, which had held subordinate bonds in the BACM deal, had argued when it filed suit earlier this year in an effort to halt Midland's sale of the A1 note to the Werner group. It had argued that the special servicer could only sell the loan after determining its fair value. In a letter at the time to Midland, the company wrote, "The special servicer owes an equal duty to maximize recoveries from the Fireman's Fund whole loan" for both the BACM and GECMC deals.

It also argued that it had held an option, by virtue of it owning the deal's controlling class of bonds, to buy the loan at that value.

The thinking is that the Werner group, by virtue of it holding the A1 note, is in the best position to buy the building, which sits in a promising area, whose vacancy rate was 20.1 percent at the end of last year, according to JLL. That rate was driven mostly by the vacancy at the Fireman's Fund property. Rents in the area, meanwhile, have shot up - by as much as 22 percent from 2017 - and have broached the $70/sf level in certain buildings.

The Fireman's Fund loan is one of two remaining in the collateral pool for the GECMC deal. The other loan is the $86.5 million piece of a $174 million mortgage against the Design Center of the Americas, a 779,936-sf office/showroom property in Dania Beach, Fla., owned by Cohen Brothers Realty Corp. That loan, whose maturity was extended in 2012 through last February, is now classified as a nonperforming matured loan.

The GECMC deal so far has suffered $234.8 million of losses, equal to 9.79 percent of its original $2.4 billion balance. Interest shortfalls, meanwhile, total $21.7 million and impact nearly all of the trust's subordinate classes up to its class AJ, which originally carried ratings of Aaa and AAA by Moody's and S&P.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.



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“The Weekly” is Commercial Real Estate Direct’s PDF newsletter, sent to subscribers every Friday morning. With over 100 news stories published on Commercial Real Estate Direct each week, “The Weekly” features the top stories in commercial real estate that industry participants need to know first. “The Weekly” also contains:

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Additional Info

  • Syndicate to Realpoint: No
  • States: California
  • Sector: Office
  • Subject: Bankruptcy/Foreclosure (BKRPT), CMBS - non-deal specific (CMBS-G), Commercial MBS (CMBS)
  • Private: No
Read 531 times Last modified on Wednesday, 16 October 2019

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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