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Prime Local Example of Pretend and Extend September 16, 2010

Posted by Sean Tufts in Articles.
Tags: , , , ,

The Columbia Tower made news earlier this year when the owner stopped making payments on the property’s loan causing it to default.  In a prime example of the now common practice of “pretend & extend”, the lender has modified the loan to three years with interest only payments with additional extension options.  We typically don’t track this type of thing but when a deal of this magnitude is in the news, you have to follow it!

Before this month’s resolution, Trepp had identified the Columbia Center debt as the nation’s largest delinquent commercial mortgage-backed securities loan.”

Beacon paid a reported $621 million for the trophy property in April 2007, which was recently assessed at $330 million (53% of purchase price).  There are numerous other downtown office buildings facing the similar situations with most expected to be bailed out in some fashion.  For instance, the loan on Met Park East was just handed over to a special servicer.  The reality is that the majority of distressed deals will be worked out with the current owner over the next couple of years and not put up for sale as a distressed asset.

Full Seattle Times article here and a good Costar article whose title summarizes distress market nicely, “Best Practices in Distress Investing: No Single Strategy Fits All”.



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