Palatium Investment Management, as one of the Class E noteholders in the White Tower £1.15bn CMBS, is very pragmatic about its recovery position.
The position, understood to be less than a third of the entire Class E, was part of the Glastonbury Finance commercial real estate collateralised debt obligation (CRE CDO), which was issued by Eurohypo in the April of 2007.
Palatium director James Tarry took a philosophical view on the expected incurred loss, despite having had no controlling influence over the recent sale of the Aviva Property office building for £288.3m to an undisclosed Asian investor.
Tarry said: “You have to weigh it up: on the one hand, the waiting game thus far has probably been beneficial in as much as all the surplus cash flow has been swept to amortise the notes – while we’ve not been directly receiving the amortisation we have had the benefit of the overall deleveraging of the capital structure. On the other hand, the Aviva property has less than 13 years remaining on the lease and is of course wasting all the time, so if the sale had been delayed, you have to ask whether a building with a 12-year lease sold up against the legal final maturity is likely to be worth very much more?”
Aviva Property is to be sold for £288.2m to an undisclosed Asian investor, bringing to a conclusion the foreclosure of Simon Halabi’s loan securitised as White Tower 2006-3, pending the transaction completion and its July interest payment date.
Tarry added: “The question for Class E noteholders is: was now the best time to sell in the market? You have to consider whether the market might weaken and CBRE achieved a yield of 5.4% on a relatively old, over-rented building, which over time, could worsen, bearing in mind the legal maturity of the notes in October 2012. All else being equal, it’s unlikely that we were going to get a massively better deal. Compared to where we thought we were back with back in 2009, it’s a huge improvement.”
CoStar Finance 