Re: Congress Street Garage Development
Tuesday, April 6, 2010, 1:29pm EDT
Congress Street complex hurting for cash
Boston Business Journal - by Tim McLaughlin
The 1.2 million square-foot parking and office complex at One Congress Street is hurting for cash.
The borrower on the so-called Government Center Garage recently asked to tap a reserve fund to meet monthly shortfalls, according to documents provided by loan servicers.
The site has been the subject of ambitious plans undone by the recession and a recent change in ownership. About a year ago, Ted Raymond?s Raymond Property Co. proposed razing the garage to build a pair of office towers replete with condos, restaurants, a hotel and other retail space.
But earlier this year, Raymond stepped aside for Thomas O?Brien, a former redevelopment chief for the city. O?Brien?s HYM Investment Group LLC has been working to get tenants to fill space vacated by the Environmental Protection Agency.
One Congress Street, meanwhile, carries a mortgage of nearly $209 million that is split into two loans, $190 million and $18.5 million, respectively, according to U.S. regulatory filings. The National Electrical Benefit Fund, a multibillion dollar pension fund in Washington D.C., is the guarantor on the debt.
Fitch Ratings, in a report this month, labeled the $190 million loan on One Congress as a ?loan of concern,? citing the property?s crimped cash flow.
Fitch said two prospective tenants are considering a total of 170,000 square feet of space at rents slightly below the former EPA lease that was done through the Government Services Administration.
?The borrower has requested draws from the debt service reserve to fund monthly shortfalls,? Fitch said in its report.
The $190 million loan for One Congress Street is one of the largest inside a $7.9 billion commercial mortgage-backed securities deal that was put together in 2007 by Wachovia Bank and Wall Street firms. The lender on the loan is Artesia Mortgage Capital Corp.
But as a buffer, at least three separate reserves were set up at the time the loan was originated.
Those reserves included $4.5 million for meeting debt service payments; $4.5 million for hitting lease targets; and $2.4 million for capital expenditures, according to filings connected to the CMBS deal.
In February, the $190 million loan was evaluated by Boston-based DebtX, which estimated it was worth about 80 cents on the dollar.
One Congress Street needs to generate enough cash to make interest payments on the loan, which doesn?t mature until 2014. Monthly payments on the loan, which comes with an annual interest rate of 6.07 percent, range from about $900,000 to about $994,000, according to Bloomberg data.
Given the increase in vacancy rates and falling property values in Boston, Fitch has determined the property is heavily leveraged. The rating agency pegs the loan-to-value ratio at nearly 130 percent.
http://www.bizjournals.com/boston/stories/2010/04/05/daily23.html