Monument to Wall Street Glory Becomes Just Another Mortgage LossBy and
AVG Partners buys loan on UBS’s former Stamford trading floor
Transaction deals $100 million loss to investors in the debt
It was once a symbol of everything that went right on Wall Street -- a mighty cathedral of frenetic trading on the Connecticut Gold Coast.
Today, 677 Washington Boulevard in Stamford, once home to the world’s largest trading floor, is a monument to debt, default and the shifting fortunes of global finance.
Formerly the U.S. trading hub for UBS Group AG, the sprawling office complex is dealing debt investors a $100 million loss years after the Swiss bank cut back its operations in the New York suburbs. AVG Partners, the private equity firm that now owns the property, has bought the defaulted mortgage in hopes of buying time to lease out the complex and, eventually, sell it.
In many ways the story of the Stamford building traces the arc of the financial industry from the 1990s to the present. Swiss Bank Corp., which was later acquired by UBS, first established the gleaming trading center in the mid-1990s.
It was expanded the next decade to house a trading floor about the size of two football fields: 103,000 square feet (9,570 square meters) with 1,400 desks. But the grand ambitions began to unravel after the 2008 financial crisis that pushed Wall Street to the brink of failure and sunk one of its biggest players, Lehman Brothers Holdings Inc.
In fact, the New York investment bank had years before bundled the mortgage on the UBS building into commercial real estate bonds and sold to investors. Those bondholders are the ones now taking the loss.
Selling the loan garnered proceeds of $54.2 million to the Lehman commercial mortgage bond trust that had owned it, Wells Fargo analysts led by Chris van Heerden wrote in a note that described portions of the asset sale. The balance on the loan was around $150 million, and combined with liquidation costs and other expenses, losses to the trust were about $100.4 million.
Now AVG Partners, which already owns the property, is trying to figure out how to rent it. Purchasing the mortgage will give it more time and flexibility to lease out the complex and then sell it, according to a person with knowledge of the transaction. The owners are working on leasing it in the coming months after trying for more than a year, said Jim Fagan, senior managing director at brokerage Cushman & Wakefield’s Stamford office, which is marketing the property to potential renters.
Michael Goodwin, a spokesman for CWCapital Asset Management, the company that controlled the defaulted mortgage, declined to comment. A call to AVG Partners wasn’t returned.
The financial crisis triggered more than $57 billion of writedowns for UBS and forced it to cut back in trading and focus more on wealth management. As UBS shrank its trading operations, it left the building in Stamford, moving workers back to New York and to a building owned by Royal Bank of Scotland Group Plc nearby in Connecticut.
While its time mainly as a securities trading venue has most likely passed, it fits nicely into the trend of companies wanting to house their workers in open environments, to maximize collaboration, Fagan said.
“It’s one of the best pieces of property between New York and Boston, it’s adjacent to the train station,” he said.