Normandy Real Estate Partners and Five Mile Capital Partners have bought the John Hancock Building for just $20.1 million, with the assumption of a $640.5 million mortgage, according to reports.
The building had been auctioned off after owner Broadway Partners defaulted on its debt. Broadway originally bought the property in 2006 from Beacon Capital, as part of a $3.3 billion, 10-building deal. The firm reportedly paid $1.3 billion for the John Hancock Tower and two other buildings.
Today, however, Normandy and Five Mile said in a statement they had made the winning bid in the auction for the Boston tower, and 10 Universal City Plaza, in California. Since June 2008, the firms have been acquiring discounted pieces of mezzanine debt secured against properties owned by Broadway.
A spokesman for the two firms declined to comment further on the deal until the transaction was closed.
According to Bloomberg, the pair bid $20.1 million for control of the 60-story building and agreed to assume the $640.5 million mortgage.
Broadway Partners was an active acquirer of property at the height of the market, but has since been forced to cull its portfolio following the credit market collapse.
Earlier this month, Broadway sold off the Washington DC office building, 1615 L Street, to former New York governor Eliot Spitzer’s family business for $180 million after defaulting on part of its debt. It had originally bought the property for $209 million in 2006 as part of the Beacon portfolio deal.
After selling the Los Angeles Citigroup Center to Hines in September last year, Broadway founder and chief executive officer Scott Lawlor said the firm was in the “midst of the most challenging investment market seen in many decades” and as a result was having to “unlock and harvest the value of properties in our portfolio”.
Bloomberg reported that bidding for the John Hancock Tower took less than two minutes in a 38th-floor conference room at the Times Square headquarters of law firm Skadden, Arps, Slate, Meagher & Flom in Manhattan. The room was less than half filled.
Bidders were asked to bid only the amount they would pay for control of the Broadway Partners limited liability corporation that held the mezzanine debt. With no minimum price, SL Green Realty, owner of the debt servicer Green Loan Services, started the bidding for control of the Hancock Tower at $20 million. The Normandy group immediately raised a black printed plaque to bid $20.1 million.
“Twenty million, one hundred thousand dollars bid,” said the auctioneer. “Going once, going twice, fair warning. Last call. Sold for twenty million, one hundred thousand dollars.”