Approximately $4.9 billion in commercial debt tied to the Blackstone Group’s market-topping 2007 buyout of Equity Office Properties – which include 12 Boston properties — has been transferred to special servicing, Fitch Ratings said today.
Blackstone is trying to restructure mortgages tied to its $39 billion EOP takeover in 2007. Bloomberg previously reported that Blackstone may be willing to extend the mortgages’ maturities in exchange for paying off a portion of the outstanding principal on the interest-only loans. Bank of America will act as the loan’s special servicer.
According to the debt-tracking firm Trepp, the $4.9 billion acquisition loan, which was securitized through Goldman Sachs, is performing. However, Blackstone is staring down a 2012 mortgage maturity.
Boston represents the single-largest office market in the $4.9 billion pool of properties, according to Trepp.
The special servicing transfer includes most of EOP’s local properties, including: 1-3 Center Plaza, 100 Summer St., 125 Summer St., the offices at South Station, 150 Federal St., 175 Federal St., 1 Post Office Square, 225 Federal St., 28 State St., 60 State St., 500 Boylston St., and 222 Berkeley St., all in Boston; 245 First St., 1 Memorial Drive, 10 Canal Park, and 1 Canal Plaza in Cambridge; 77 South Bedford St., 25 Mall Road and the New England Executive Park in Burlington; 275 Grove St. in Newton; and the Wellesley Office Park in Wellesley.
Commercial property values have fallen far from their 2007 heights, Wall Street mortgage securitizations have all but ceased, and banks and insurance companies have tightened loan-to-value requirements, meaning that refinancing of any boom-era loan would likely require a significant injection of new capital.
Blackstone, which has traditionally made money buying and flipping firms, is believed to be eyeing ways to exit the EOP portfolio, either by taking the office unit public, by selling the portfolio wholesale, or by spinning off office buildings piecemeal. Blackstone flipped many pieces of the EOP portfolio immediately after acquiring them, but the firm needs to wait for the capital markets to recover, and for values to bounce back, to unload the rest.
Blackstone could not be immediately reached for comment.
