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Morgan Stanley Handing Back 1.2M Square Feet of SF Assets

December 9, 2009

As we indicated last month, Morgan Stanley is handing back the keys on billions of dollars worth (former worth, that is) of Class A San Francisco property. The properties are going back to the mezzanine lender, AREA Property Partners. The question now is what is AREA going to do with the assets considering that they were the mezzanine piece and values on these assets have tumbled. If the broader market is any indicator, the values are off by around half and underwater as well.

The properties going back are 1 Post, 201 California, Foundry Square I, 60 Spear, and 188 Embarcadero. After the acquisition, Morgan Stanley dumped these assets onto Glenborough, which it acquired for some $1.9B alone. What should be noted here is that while some of these assets (60 Spear St) are almost empty, others (Foundry Square) are almost 100% leased, which underscores how securitization and cross-collateralization put even performing assets at risk.

Glenborough is now looking questionable once these assets go back given that it will be a shadow of itself. This loss for Glenborough will likely be compounded by a rumored loss of its Denver portfolio.

There will likely be a lot of news about this deal coming out over the next few days. The Business Journal has an article out from a few hours ago, and the big papers will likely follow up with their own. The Registry also has come out with an article of their own.

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Categories: Commercial Finance and Lending | Commercial Real Estate Investing | Notable Deals
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Cap Rate December 10, 2009

Anybody know which securitization these loans were in? Thanks.

Square Feet December 10, 2009

Possibly 2007-FL14 ?

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