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Broadway Partners Runs Into Trouble – San Francisco Holdings On The Table?

October 11, 2008

During 2006 and 2007, New York’s Broadway partners went on a tear, acquiring billions of dollars worth of real estate, with Lehman Partners providing the financing for a good chunk of it. That put Broadway Partners on the map as the third largest acquirer of New York City office buildings after Macklowe and Tishman Speyer.

It seems that their is now a fire under their rears as short-term mezz debt comes due. Several New York real estate publications indicate that they are scrambling to sell off assets to repay the load of short-term debt they took on to complete the acquisitions. Unfortunately, if what happened to Macklowe Properties is any indication, they might be in for a bit of a rough ride.

Broadway Partners, in their dramatic rise over the past several years also expanded outside of New York, and acquired several local assets from Beacon Capital as part of a 24-property portfolio back in 2007, at what can be considered close to the height of the market frenzy gripping the investment market.

Amongst the assets it acquired in May of 2007 were several San Francisco properties, including:

  • 1 Sansome Street (550K SF) – Majority leased to Citibank
  • 50 Beale Street (650K SF) – Major tenants include Blue Shield and Bechtel
  • 100 California Street (288K SF) – Major tenants include Embarcadero Technology and General Electric
  • 120 Howard Street (145K SF)

Those assets were acquired as part of an overall portfolio transaction valued at nearly $5B. At the time, the San Francisco transaction was seperately valued at roughly $900M. In addition, Broadway made another acquisition, not related to the Beacon Partners portfolio, when it acquired the 170,000 SF, 701 Gateway Blvd in South San Francisco in March of 2007 for $66M ($388 psf) in March of 2007. That building is currently 70% occupied.

It’s difficult to say what Broadway will ultimately due, but their M.O. over the past several years has been to take advantage of market optimism and lax lending standards to reap significant profits on short term holdings of trophy properties. Unfortunately, both market optimism and lax lending standards have gone away for the time being.

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Categories: Commercial Finance and Lending | Commercial Real Estate Investing | Trends
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Deglazer October 21, 2008

Mirae Asset ended up backing out of their deal. It ain’t closed until the cash is in the bank!

squarefeetblog October 21, 2008

Thanks, I heard this today as well! I also heard that Mirae had gone hard on their deposit. I’ll write an update post shortly…

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