Vornado Plays Role in Macklowe Default Deal
- Feb 12, 2008
Vornado Realty Trust, which owns some of the mezzanine debt on Macklowe Properties’ $7 billion debt on a portfolio of Manhattan trophy towers, may be playing the spoiler in a deal enabling Macklowe to fend off foreclosure.Developer Harry Macklowe was served with a notice of default Monday, according to a report by Jennifer Forsyth in the online edition of the Wall Street Journal. Forsyth reported that two sources close to the deal noted Vornado was the most vocal opponent of a proposed bailout plan.Citing an October federal filing, Forsyth reported that Vornado had bought a 42 percent interest in two mezzanine loans on four New York office properties from the original Equity Office Properties Trust deal. Vornado had disclosed that it had paid $66.4 million in cash for its portion of the loans totaling $158.7 million.Macklowe had bought the seven skyscrapers last year from EOP for $7 billion. CPN reported Feb. 8 that Macklowe owed $5.8 billion in short-term debt to Deutsche Bank AG and $1.2 billion to Fortress Investment Group. He had reportedly worked out a deal with Deutsche Bank, the primary lender, but all the lenders, including those holding subordinate, or mezzanine debt, like Vornado, also had to sign off on any deal. The notice of default went out when no agreement was in place by Monday, according to the Wall Street Journal..A Vornado spokesperson would not comment on the matter today.“Vornado purchased the debt as a strategic investment. I’m not sure they wanted to be a lender on this portfolio. But they’re obviously doing now what they think is in their best interest,” Dan Fasulo, director of market analysis for Real Capital Markets, Inc., told CPN today.“As far as the details, everyone has been very quiet about what has been going on with the negotiations,” Fasulo said. “There’s nothing wrong with the properties. (Macklowe) just has the wrong debt on them.” According to Forsyth, sources told her Vornado officials are worried that if the buildings were to be sold now, the sales prices would be lower than a year ago, significantly affecting their investment.In other Vornado news, the New York City-based REIT announced today that it had completed a $335 million refinancing of its 1.8 million-square-foot Green Acres Regional Mall in Valley Stream, N.Y. The Long Island mall has been undergoing about $84 million in renovations and additions, according to filings with the Securities and Exchange Commission. Vornado said the interest-only loan has a rate of LIBOR plus 1.40 percent and matures in February 2011 with two one-year extension options. After repaying the existing loan and closing closes, VNO had net proceeds of about $193 million. Information on what the company planned to do with the proceeds was not available by press time today.