| NEW YORK, April 21
NEW YORK, April 21 A building bought by Harry
Macklowe nearly three years ago is set to be auctioned off
Wednesday in the second high-profile foreclosure auction of a
U.S. skyscraper in less than a month.
The Financial Times Building, at 1330 Avenue of the
Americas in Manhattan, serves as the U.S. headquarters for the
financial newspaper owned by Britain's Pearson PLC (PSON.L).
Macklowe bought the building, which sits between 53rd and
54th Streets, for $498 million in 2006, a year before he went
on a buying spree, acquiring seven Manhattan office buildings
from Blackstone Group (BX.N) for $7 billion.
When he could not get a mortgage to replace a bridge loan
for those buildings, Macklowe was forced to return the
properties. The financial debacle was one of the first of the
credit crisis and forced Macklowe to sell off the prized
General Motors Building.
The foreclosure of 1330 Avenue of the Americas is likely to
be one of a wave of defaults on loans for U.S. commercial real
estate bought during the real estate boom from about 2004 to
2007, when sky-high prices were fueled by easily available debt
financing and questionable underwriting of loans.
"Based on the current underwriting, that building isn't
worth the first mortgage," said a leading Manhattan broker
familiar with the building.
The holder of the $130 million senior portion of the
mezzanine loan, Otera Capital Corp, a subsidiary of Canada's
largest pension fund, Caisse de depot et placement du Quebec,
filed to foreclose on the property after Macklowe defaulted in
The auction is part of the foreclosure process in New York.
Experts said it is likely Otera will win the auction. If not,
the pension fund could be forced to write off the loan.
Mezzanine debt consists of loans secured by the sponsor,
often an incorporated entity created just for the purchase and
ownership, not by the building. They are used to fill the gap
between the equity put up by the sponsor and the mortgage
secured by the property.
German American Capital Corp, an affiliate of Deutsche Bank
AG (DBKGn.DE), holds the $240 million senior mortgage on the
Last month, Boston's John Hancock Tower was sold at a
foreclosure auction for $660 million, about half of what
Broadway Partners paid for it in 2006. In that auction, the
building went to Normandy Real Estate Partners and Five Mile
Capital Partners, who had been buying up the mezzanine debt at
distressed prices since June 2008.
Fitch Ratings said on Monday that delinquencies of
securitized senior mortgages on U.S. commercial real estate
loans rose one-quarter of a point to 1.53 percent, pushed up by
the number and average loan size of new defaults.
Loans securitized into commercial mortgage-backed
securities (CMBS) in 2006 through 2008, accounted for 53.8
percent of all delinquencies, according to Fitch Ratings CMBS
Loan Delinquency Index. In March 2009, 202 loans rated by Fitch
totaling $1.7 billion became delinquent. As of March, the
average size of traditional CMBS loans within the index stood
at $9.2 million, compared with $6.9 million six months ago.
(Reporting by Ilaina Jonas; Editing by Tim Dobbyn)