Hong Kong’s Gaw Capital Partners is looking to refinance Seattle, Washington’s tallest building, the Columbia Center, after agreeing to pay a reported $725m for the property, Real Estate Capital has learned.
The property is encumbered by a $300m A note and an $80m B note (hope note), the latter of which is expected to be paid off once the sale closes.
The buyer is likely to refinance in order to lock in low interest rates, according to data firm Trepp.
“It remains to be seen if the buying firm will be assuming that debt, but given the price tag, it wouldn’t be surprising,” Trepp research analyst Sean Barrie told Real Estate Capital. “The B note will be the first priority to pay off since there could be major penalties incurred if it’s not paid. Afterwards, the A note could certainly be refinanced.”
The seller of the property, Beacon Capital, and Gaw Capital, did not return calls seeking comment.
Beacon bought the 76-story, 967-foot, 1.5m sq ft property in 2007 for $621m, the same year the property was appraised at $650m. But top tenants like Amazon.com began to file out during the recession and ownership began to struggle with loan payments.
In October 2010 an original $380m securitized loan on the property — part of MSC 2007-HQ12 — was modified and split into the $300m and $80m slices after falling into the hands of special servicer LNR Partners due to “deteriorating performance and cash flow distress,” according to a research memo from Barclays. The appraised value of the building plunged to $330m.
“The loan hit rock bottom in 2012 when occupancy dipped as low as 63% and DSCR was 0.61x,” Barclays wrote. But occupancy and DSCR have recovered to 78% and 0.71x, respectively, following the leasing of space to Rhapsody International and Freestone Capital Management in 2014.
Barclays estimated that a $562m sale price was needed to pay off the B note, which became overdue last month. That leaves the $300m A note outstanding, in addition to $50m of additional subordinate debt outstanding in a note held outside the trust.