Boston Properties said it agreed to sell Carnegie Center, a 2 million-square-foot office park in Princeton, N.J., to a joint venture between Normandy Real Estate Partners and the Landis Group for $468 million.

In January, Doug Linde, president of Boston Properties, said the company might sell most or all of the 16-building complex, as part of a group of suburban properties that it was thinking about selling.

“I talked to Carnegie Center and we’re recapitalizing to sell a significant portion or a full on the entire Carnegie Center asset base depending on what that pricing looks like,” Linde told analysts in the January call, according to a transcript from SeekingAlpha.com. “We’d like to try and retain management and development because we still control the land for another seven-plus years and that will kind of play out.”
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From the February issue: It’s been a sort of parlor game in New York’s real estate community for
some time: speculating on whether peak-market buyers will hold on to
their highly leveraged properties.
Then, in a move that shook the industry last month, Tishman Speyer
Properties and BlackRock Realty decided to turn over the keys to the
$5.4 billion Stuyvesant Town and Peter Cooper Village.
But not everyone has gone this route. Other overextended borrowers
have kept control of their properties following a debt restructuring,
including developers Lev Leviev and Joseph Moinian.
As part of a workout — the complex process that’s often decided by
the leverage each party has in the development — the bank or private
equity firm must weigh its options.  [more]

From the October issue: As the real estate industry scrambles to unwind billions of dollars in
distressed inventory, a number of high-profile deals are stuck in
neutral as lenders battle it out with each other to see who will get
paid and who will be left holding the (empty) bag. While creditors often turn on each other during a workout, the massive
number of securitized loans with multiple lenders and third-party
servicing firms managing the funds is creating a level of complexity
that may take years to sort out, analysts said. Unlike the previous downturn in the 1990s, the majority of large deals
during the recent real estate boom were made using securitized loans –
or at least loans with large syndicates, or groups of lenders sharing
the burden of a single loan.

From the September issue: With dwindling cash reserves, some commercial real estate borrowers in New York have resorted to aggressive tactics, like withholding payments or paying late, to get their lenders to agree to modify loans.

It’s a game of chicken borrowers sometimes play with lenders, sources say, because as long as borrowers stay current, lenders are reluctant to modify their loans.

In addition, unless the loan is in imminent risk of default, loan officers and servicers of securitized loan pools often cannot change the terms of a mortgage. “I see it happening in New York, and I see it happening nationally,” said Constantine Korologos, managing director at advisory firm Deloitte Financial Advisory Services. “A borrower says, ‘I have a train wreck approaching,’ and the [loan] servicer says, ‘Sorry, you are still current.’” The property owner is therefore “forced to become a bad borrower to get the attention” of the loan servicer, he said. more

Mezzanine lenders are swooping in to seize control of an increasing
number of properties when owners fall behind on mortgage payments.
Fortress Investment Group foreclosed on Sheffield57, and Normandy Real
Estate Partners and Five Mile Capital spent nine months buying up
discounted debt so that they could foreclose on Boston’s John Hancock
Tower and a building in Los Angeles. In Manhattan, more foreclosures
are likely, with 130 troubled properties worth $7.5 billion, according
to Real Capital Analytics. But foreclosures are complicated because
many buildings have tiered financing, and each lender has some rights
to a building. [more]

Lev Leviev (left) and the former New York Times Building

A private equity firm that helped fund the $525 million purchase by Lev
Leviev’s AFI USA of the former New York Times Building in 2007 is
accusing the buyer of scheming to wipe out the lender’s $79 million
mezzanine position. The mezzanine lender, Stamford-based Five Mile Capital Partners,
charged in a 30-page breach of contract lawsuit that AI Holdings (USA),
a subsidiary of AFI USA, is overstating a loss in value of the building
to trigger a technical default that would permit the senior lender,
Banco Inbursa of Mexico, to foreclose on the property. The property value was marked down from $690 million following the
purchase to $315 million as of December 2008, the filing says, creating
the event of default.  More

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