Tishman Speyer Properties LP and its partners paid off $600 million in debt on a group of Washington-area office buildings, averting a foreclosure auction that had been scheduled for next week.
A partnership led by the New York-based property company put $700 million of new capital into the holdings, Tishman Speyer said in a statement yesterday. The investors included SITQ Inc., a unit of Canadian pension fund manager Caisse de Depot et Placement du Quebec.
Tishman Speyer, which bought the 28 buildings from Blackstone Group LP (BX) near the peak of the commercial real estate market in 2006, stopped making interest payments on the debt last July, according to Standard & Poor’s. The recapitalization enables the property owners to hold onto prime assets in one of the country’s best-performing office markets.
“It is a very high-quality office portfolio and that’s a significant factor” in Tishman Speyer’s efforts to hold onto the assets, said Sam Chandan, global chief economist at Real Capital Analytics Inc. in New York.
Tishman Speyer has struggled to repay debt from other acquisitions made near the top of the market. The company and partner BlackRock Inc. defaulted on debt tied to New York’s Stuyvesant Town and Peter Cooper Village, Manhattan’s biggest apartment complex, in January after they were unable to raise rents as fast as anticipated. The companies bought the property for $5.4 billion in 2006.
Tishman Speyer acquired the Washington-area buildings from Blackstone as the New York-based private-equity firm sold off properties from its takeover of CarrAmerica Realty Corp. Brookfield Properties Corp. (BPO) bought debt on the buildings and began foreclosure proceedings after the missed payments. Barclays Plc (BARC), an agent for certain lenders, scheduled an auction of the debt for June 15 in Manhattan, according to an advertisement in the Wall Street Journal last month.
Calls to Melissa Coley, a spokeswoman for New York-based Brookfield, weren’t returned yesterday.
The properties are located in Washington, Northern Virginia and Maryland. They include International Square, 1730 and 1747 and 1775 Pennsylvania Ave., and the Commercial National Bank Building, according to Tishman Speyer.
“We are pleased to successfully complete this recapitalization process and reaffirm our commitment to the Washington, D.C. office market,” said Tishman Speyer Co-Chief Executive Officer Rob Speyer in the statement.
Office rents in Washington fell 4.8 percent in the first quarter from a year earlier, according to Reis Inc. Nationwide office rents slumped 7.9 percent in the same period and New York rents dropped 16.3 percent, data from the real estate information company show.
Washington had the country’s lowest office vacancy rate in the first quarter at 10.4 percent, according to New York-based Reis. That compared with 11.7 percent for New York and 17.3 percent for the U.S. as a whole.
“Compared with most large metropolitan areas in the U.S., Washington D.C. has experienced a relatively milder decline in employment and it’s on a healthier trajectory to recover jobs over the course of 2010,” Chandan said.
Tishman Speyer last week said it restructured debt on a group of downtown Chicago offices it bought from Blackstone in 2007. The buildings included 161 N. Clark St., 10 and 30 S. Wacker Drive, and the Civic Opera Building on Wacker Drive.
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