12/11/2009

Borrower Sees Hints of Firmer Loan Market

A Monday Properties partnership that is looking to refinance $239 million of securitized mortgages is finding interest among lenders to be stronger than it expected.

The partnership started shopping the assignment in September via Cushman & Wakefield. After touching base with multiple lenders, primarily insurance companies, the borrower now thinks it will get more-favorable terms than it originally envisioned.

"We have been pleasantly surprised by how the lending market has picked up since we began this process in the summer," said Richard Brookshire, director of acquisitions and investment management for New York-based Monday. "The good news is that it does appear there is debt capital available for high-quality real estate with strong sponsorship."

After considering several options, the partnership now expects to be able to achieve its preference: a 10-year, fixed-rate loan from one lender on the entire 1.1 million-square-foot portfolio of office properties in the Rosslyn section of Arlington, Va. However, with the market firming up and the existing loans not scheduled to mature until the middle of next year, the partnership is not in a rush to finalize terms. It is hoping that conditions will improve further over the next few months.

To be sure, the Monday team is in a better position than many other borrowers seeking to refinance. Brookshire declined to specify what the loan-to-value ratio would be for a $239 million loan, but it would clearly be within a range acceptable to many lenders under the stricter standards now prevailing. By contrast, many borrowers that bought properties when the market was peaking are unable to refinance the full amount because of the plunge in property values.

The Monday portfolio is 97% occupied. The U.S. General Services Administration just renewed leases on about 300,000 sf, or 28% of the portfolio, for five years. Some of the new leases don't kick in until current leases expire in 2013.

The six properties, which include ground-floor retail space, are 1200 Wilson Boulevard (146,000 sf), 1400 Key Boulevard (174,000 sf), 1401 Wilson Boulevard (198,000 sf), 1501 Wilson Boulevard (126,000 sf), 1515 Wilson Boulevard (127,000 sf) and 1701 North Fort Myer Drive (280,000 sf). The properties were built from 1964 to 1970.

In 2005, Monday and its partner at the time, a fund operated by Beacon Capital Partners, lined up three loans on the properties from Wachovia, which securitized them via a $3.7 billion pooled deal (Wachovia Bank Commercial Mortgage Trust, 2005-C20). The $1 billion Beacon fund, Beacon Capital Strategic Partners 3, later sold its position to Broadway Partners, a fund operator in New York, which quickly flipped it to an undisclosed buyer.

Monday's predecessor company, Max Capital Management, was founded in 1998. Anthony Westreich joined the company in 2002 and took it over in 2004, when he recapitalized and renamed it. Monday owns and operates 18 buildings, encompassing eight million sf, in New York and the Washington area.

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