CityPoint tower options weighed as Beacon defaults

Beacon Capital Partners has defaulted on another interest payment date relating to the £429m loan secured by the CityPoint tower, EC2, increasing the likelihood that the 36-storey building will come to market, writes CoStar News’ James Buckley.

Beacon has failed to make interest payments due today, following a standstill agreement with special servicer Morgan Stanley Mortgage Servicing Limited, which began on 5 March and ended on Wednesday.

Following the termination of the standstill agreement, Morgan Stanley said it “is now considering its options”.

A sale of the 703,382 sq ft City asset, at 1 Ropemaker Street, has long been anticipated by investors given that lengthy negotiations between Beacon and bondholders have failed to result in a restructuring plan being agreed.

CoStar News revealed in January that Beacon was negotiating an injection of up to £20m in fresh equity in the loan securing the tower to stave-off interest payment shortfalls. However, sources said that additional equity was not provided, so the loan was not restructured.

Morgan Stanley said: “Morgan Stanley Mortgage Servicing Limited, in its role as special servicer, has informed the issuer that the borrower under the loan agreement has failed to make sufficient payments to meet all of its obligations in respect of interest due on the whole loan on the loan payment date falling on 20 April 2012.

“As a result of the previous interest payment default the servicer had entered into a standstill agreement until 5 March 2012 (such period being subsequently extended to 18 April 2012) with a view to reaching an agreement whereby the previous interest payment default could be remedied.

“The standstill agreement terminated on 18 April 2012 and the special servicer is now considering its options.”

Beacon bought CityPoint in April 2007 for £650m from a consortium of investors – comprising Tishman Speyer, Caisse De Depot Et Placement Du Quebec, Schroders and UBS Global Asset Management – in what was then the largest City property transaction.

The loan was then securitised by Morgan Stanley in July 2007 in the investment bank’s £429m Ulysses ELoC 27 CMBS, with a two tranche £106m junior loan, of which £18m was repackaged in a B-Loan Repackaging Programme, called Hillenbrand Partners. The securitised loan matures on 21 July 2014.

Last February, an updated valuation put Citypoint’s value at £447m – against a £535m whole loan – meaning the majority of the junior loan is currently out of the money. The securitised loan’s LTV is at 96%, while the whole loan is at 119.7%.

There are 30 tenants in CityPoint with law firm Simmons & Simmons the anchor tenant providing £11.1m, or 40.1%, of the tower’s £27.7m annual rent. The vacancy rate is 6.95%, with a weighted unexpired lease of 8.8 years.

The trophy property’s troubles are in part the result of a difficult occupier market with tenants still retaining the balance of power with the multiple tenants which have lease break clauses or expiries in the coming two years all being courted by the owners of London’s emerging new skyscrapers.

jbuckley@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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