Real estate manager The New Boston Fund is working to retain control of a sizable chunk of its portfolio, after an $85.5 million securitized mortgage tied to 900,000 square feet of office space around Boston is close to defaulting.
According to the ratings agency Fitch Ratings, the mortgage has been transferred to a special servicer after it reached maturity, and New Boston Fund was unable to produce replacement debt.
A spokesperson for The New Boston Fund said the loan has been extended, but had no further comment.
Morgan Stanley Mortgage Capital made the $96.5 million mortgage in January 2007, and it has since amortized down to $85.5 million.
The properties pledged as collateral to the mortgage include: the New England Business Center in Andover; 155 and 159 Swanson Road in Boxborough; One Alewife Center in Cambridge; 2 Cabot Road in Hudson; and 740-800 South St. in Waltham.
The absence of a functional market for refinancing commercial mortgage-backed securities (CMBS) has forced borrowers, even those with performing assets, into default. Many lenders with performing assets have responded by extending the loan out several months, waiting for a robust mortgage refinancing market to reappear.
CMBS bondholders can’t extend loans indefinitely. And dramatic declines in commercial values coupled with lenders’ tightening loan-to-value requirements mean most borrowers rolling out of loans from 2006 and 2007 have to invest significant amounts of equity into their assets to secure a new loan. In many cases, investors who took mortgages in 2006 and 2007 are finding their buildings are now worth less than the debt on them.
Banker & Tradesman reported this week that lenders with cash are deploying their capital selectively, mortgaging only the best-performing properties. New Boston Fund’s Morgan Stanley portfolio has blocks of open space – 43,000 square feet of 147,000 in Hudson, and 51,000 square feet of 90,000 in Cambridge – that could prove unpalatable to lenders.
Tight credit and faltering performance have caused CMBS delinquencies to explode nationwide. The balance of delinquent CMBS loans nationwide stood at $41.6 billion in December 2009, up from $8.7 billion in December 2008, according to the data firm Realpoint. As of December, special servicers controlled 8.6 percent, or $66.9 billion, of all outstanding CMBS, up from 1.6 percent in December 2008.
