The Real Deal New York

BlackRock loses millions on Macklowe loans

April 07, 2009 04:39PM
By Adam Pincus

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alternate textThree former or current Macklowe properties, left to right: 1330 Avenue of the Americas, 527 Madison Avenue, Tower 56 at 126 East 56th Street.

Investment management firm BlackRock said a handful of mezzanine loans on New York City real estate have lost all or most of their value in 2008 as the commercial market soured.

BlackRock pegged the potential loss at $53.2 million from two mezzanine loans on current and former Macklowe Properties office buildings, and around 60 percent of a $20.5 million mezzanine note on an apartment complex in New York City owned by another partnership, recent federal filings show.

BlackRock, a publicly-traded asset management firm based in Midtown, said it expected to lose $53.2 million on two loans on five office buildings bought by Macklowe Properties in 2006 and 2007, according to an amended annual report filed March 31 by BlackRock affiliate Anthracite Capital with the Securities and Exchange Commission. The anticipated losses were recorded as loan loss reserves for buildings including 1330 Avenue of the Americas, which Macklowe currently owns, and 527 Madison Avenue, which Macklowe sold, the filings show.

A loan loss reserve records the current estimated loss in value on the debt, but is not a permanent reduction in value, which would be represented by a write-down, said Seth Molod, partner in the real estate services group at accounting firm Berdon. Loan loss reserves are not the same as write-downs, he said. He was not involved with any of the loans.

The expected losses in relation to Macklowe’s buildings include the entire value of a $35 million mezzanine loan BlackRock purchased in 2007 at 1330 Avenue of the Americas. The loan was written on  the 42-story tower Macklowe bought in 2006 for just under $500 million. Now, another mezzanine holder, Canadian real estate investment entity Cadim reportedly is offering a more senior $130 million note held on the property for sale.

BlackRock also recorded a $17.74 million loan loss reserve for the full value of another note held on four buildings Macklowe purchased in 2007 — 527 Madison Avenue, Tower 56 at 126 East 56th Street — both which Macklowe sold — plus two unidentified properties.

In addition to the office buildings, BlackRock noted a $12.2 million loan loss reserve on a $20.5 million mezzanine loan used to finance a 1,802-unit apartment complex in the city, according to an Anthracite Capital annual report filed March 18 with the SEC.

The filing did not identify the apartment complex by name, but an industry source said it was likely the Savoy Park in Harlem, a 1,802-unit residential development at 45 West 139th Street, owned by real estate investment company Vantage Properties and private equity firm Area Property Partners, formerly Apollo Real Estate Advisors.

BlackRock and Vantage Properties did not respond to a request for comment. Area Property Partners declined to comment.

BlackRock’s $20.5 million loan has the highest interest rate, at 9.125 percent, among four mezzanine loans totaling $157 million on the property. There is an additional $210 million first mortgage on the complex that has been packaged into a commercial mortgage-backed security. That loan is on a servicer watchlist, according to Trepp, which tracks the commercial mortgage industry.

Harold Shultz, a senior fellow at the advocacy group Citizens Housing and Planning Council said he was surprised BlackRock did not put the entire value of the Savoy Park note in reserve. He estimated the property could sustain a total debt load of only about $120 million.

“What possessed them to think that there was any value left in this loan at all?” he said.

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