The property, built in 1950, is the collateral for a $308 million loan that was originated by Deutsche Bank and securitized into a single-asset single-borrower CMBS in 2015. This CMBS is backed by only the loan on this building, and there is no diversification within it. Now Blackstone is letting the holders of the CMBS have the building and eat the losses.
In Manhattan, 18.6% of the total office space was on the market for lease at the end of Q4, according to Savills. And new buildings are being completed and add to the total availability, and when their lease expires, companies can upgrade to the latest and greatest, and they can downsize and upgrade, and what’s left behind are these vacant older office towers.
For example, in Houston’s Energy Corridor, the 450,000-square-foot Two Westlake Park defaulted on a $87.5 million loan in 2018 and was sold in mid-2020 in a foreclosure sale for $18 million. After fees and expenses, the CMBS holders booked a loss of 82%. The vacant Three Westlake Park in the same complex, once “valued” at $121 million, was sold last month at a foreclosure sale for $20.6 million. After fees and expenses, the CMBS holders booked a loss of 88%.Another Office Tower Goes Bust: Blackstone Walks from Manhattan Tower it Bought for $605 Million. CMBS Holders to Eat Remaining Losses | Wolf Street