A few months after the $3-billion first mortgage on the Peter Cooper Village/Stuyvesant Town apartment complex in New York City first went into special servicing and then into foreclosure proceedings, another high watermark deal of the current market has started down a similar route. The Blackstone Group in late May transferred to a special servicer the $4.9 billion of CMBS debt remaining from its $39.2-billion purchase of Equity Office Properties Trust. It’s reportedly now the largest loan in special servicing.
In reporting the transfer, Fitch Ratings cited “imminent default” as the reason. Peter Rose, a spokesman for Blackstone, told Bloomberg that his company had begun discussions with the lender, Back of America, on extending the debt. “Special servicing is simply a routine administrative step in order to start these discussions,” Rose said in May. Calls by Distressed Assets Investor for additional comment were not returned by deadline.
The Blackstone/EOP debt, which stems from a single nonrecourse, interest-only, floating-rate loan securitized in 2007, is both indicative of trends in distress and a special case. On the one hand, “It’s the exception, rather than the rule,” says Jon Barry, the Atlanta-based national managing director of Colliers International’s asset resolutions team. “This is a very large portfolio and is not at all indicative of the vast majority of CMBS loans in their present condition.”
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