• 23
  • December
    2010

Beacon Capital Partners has successfully made a huge commercial loan modification on its troubled loan of $2.7 billion. The loan was one of the largest commercial real estate loans to ever be securitized, according to a Beacon spokesperson.

Atlanta loan workout attorneys noted that Beacon originally used the funds from the loan to buy a 20-building office portfolio in Washington, D.C. and Seattle. The purchases were made in 2007, near the top of the real estate market. The loan was carved up into commercial-mortgage-backed securities.

The Seattle property is the Columbia Center. The loan on that property was worked out earlier this year. Beacon reworked a $380 million securitized loan on the 76-story Columbia Center. Beacon was able to get a three-year extension on its loan, with options for two more years.

Beacon said that the new workout will have a positive outcome for the bondholders and the equity.

All of the details of the workouts are not known, but the restructurings appear to allow Beacon to escape the risk of CMBS investors foreclosing on its giant holdings. The loans became troubled when high rents set in better times failed to materialize as economic times worsened.

Blackstone Group sold the 20-building, 9.9-million-square-foot portfolio in 2007. It had been owned by Equity Office Properties, a public company that Blackstone acquired that year.

The loan to finance the purchase was so large that it was spread out over seven batches of securities.

Beacon wanted to decrease its loan payments, stretching out the loan while cutting its interest rate. Income on the properties was barely covering the mortgage payments, with a slim debt service coverage ratio of 1.08 at the end of last year.

Earlier this month, an agreement was reached that gave a 5-year extension to the interest-only loan. The interest rate was cut from 5.797% to 3%, according to ratings agency Standard and Poor's. Beacon must also put in two hundred million dollars in new collateral.

More CMBS loans are running into trouble every week, bringing the delinquency rate to near record highs.

Source: Wall Street Journal "Beacon Capital Closes on Loan Modification" 12/15/2010