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First Signs of Cracking: Broadway Partners Defaults on Hancock Tower

January 9, 2009

Hancock Tower, Boston, MANew York’s Broadway Partners has apparently defaulted on their loan on an acquisition they made back in 2006, according to a report in the Boston Herald. The acquisition of Hancock Tower in 2006 for $1.3 Billion was a landmark deal at the top of the market. Hancock Tower is a 60-Story, 1,755,398 square feet, Class-A office tower that Broadway Partners acquired on 12/28/2006.

The building is the tallest tower in New England and also features a 2,000 stall parking garage, and is home to tenants such as Deloitte & Touche, Investors Bank and Trust, Marsh and McLennan, Hill Holiday and Charles River Associates.

According to the article, Broadway Partners issued a statement yesterday in an attempt to reassure investors:

Despite difficult market conditions, we continue to work hard with our lenders and partners to address debt obligations,” the statement read. “In the meantime, Broadway Partners continues to operate great buildings with high service standards.

The article indicates that the lenders were Royal Bank of Scotland’s Greenwich Capital, and in the amount of $640M. In addition, Lehman Brothers had provided another $450M of debt for the acquisition.

Given those numbers and a weakening market, a sale would be insufficient to cover the debt and would likely result in Greenwich Capital Financial losing a lot of money should they have to take the asset over and dispose of it.

We previously wrote a piece on Broadway Partners back in October questioning Broadway and when their San Francisco assets would come into play.

Thanks to reader DD for the head’s up.

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miko tam March 31, 2009

any idea what the cap rate is or what the NOI was for the building??

squarefeet March 31, 2009

Not sure, but if I had to take a guess, I’d say at the time of the acquisition, it traded at a 4.5% CAP.

If you assume 4.5% cap at $1.3B = $58.5M NOI. $58.5M NOI over today’s sale at $660M = 8.8% CAP, and since then I believe they’ve lost some tenants, and rents have come down, so today’s sale is probably closer to a 8% cap on today’s income.

But of course, this is a guesstimate from 3000 miles away.

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