Monday, February 9, 2009

Deutsche Bank Offers Financing to Unload Remaining Macklowe Buildings

The last time we checked in with Mr. Macklowe's commercial real estate legacy, it was May 2008.  The formerly high-flying real estate developer was dumping the GM building in Manhattan to pay back his mezzanine lenders, Fortress Investment Group, so that his personal assets would remain, well, his personal assets.  The sale of the GM building as well as three other towers went off without a hitch, as the commercial real estate market had yet to come to a screeching halt.  Mr. Macklowe was not booted out of his fancy digs at the Plaza Hotel.

But what has become of the other buildings Mr. Macklowe was forced to hand over to Deutsche Bank when he defaulted on his loan?  The Wall Street Journal has a good piece on two of the properties left in Deutsche Bank's possession: the World Wide Plaza and 1540 Broadway.  A San Francisco based hedge fund, Fillmore Capital Partners, is currently in talks to take control of the two office buildings.  Fillmore owns as much as $400 million in mezzanine debt on the properties and is considering purchasing the buildings to salvage its own souring investment.  Because doubling down on a losing bet is always a savvy investment strategy.    

Deutsche Bank apparently has attempted to auction the buildings and came close to doing a $2 billion deal, but the bids evaporated as the financial crisis mounted.  Complicating the matter further, both buildings have significant empty space making it much more difficult to garner a high value on the properties when the cash flows, well, aren't flowing.  According to the article it is unclear how much additional capital Fillmore would need to contribute to do a deal, but Deutsche Bank is willing to offer financing.  The good news is if a deal does go through, then Deutsche Bank will be relieved of this albatross and Fillmore Capital will be working hard to try to salvage its original investment, if that is even possible.  The bad news for Deutsche is that if it is providing the financing, in a year or two it may be experiencing deja vu all over again.  

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