Maguire Negotiates Property With Servicer
LOS ANGELES-Maguire Properties, a real estate investment trust here, and its joint venture partner, Macquarie Office Trust, have entered into negotiations with the special servicer under the CMBS financing covering the Quintana campus in Irvine, Calif., in anticipation of a possible payment default.
According to the REIT, the Federal Deposit Insurance Corp., as receiver for Washington Mutual Bank, relinquished the majority of its Quintana lease effective March 2009 and was not obligated to pay any rent or other compensation in connection with the lease termination. The unexpected relinquishment of the leases reduced the occupancy of Quintana by approximately 250,000 square feet to 40% occupancy, resulting in a significant reduction in the cash flows of the property. The $106 million CMBS financing covering the property is due to mature in December 2011.
"The FDIC's rejection of the leases at Quintana was a highly unusual and unfortunate event," said Nelson C. Rising, president and CEO of Maguire Properties, in a statement, adding that the companies decided "that the best outcome for our respective firms is to commence discussions with the CMBS special servicer in lieu of continuing further capital funding at the Quintana campus."
He said that the companies are prepared to work collaboratively with the servicer and aim for a satisfactory outcome for all parties.
The loan is not cross-collateralized or cross-defaulted with any other debt held by Macquarie Office Trust or Maguire Properties.
Separately, Maguire Properties completed the sale of 3161 Michelson located at the Park Place campus in Irvine to an affiliate of the EMMES Group of Cos.
The 3161 disposition enabled the company to eliminate a number of things, including the project-level debt that was scheduled to mature in September 2009, a New Century master lease obligation with a potential exposure of up to $16 million, a $24 million principal repayment guaranty and a master lease parking obligation with a potential exposure of up to $50 million.
In addition, it allowed the REIT to release a 1,380-space parking structure from the encumbrance of the existing mortgage and increase cash flow by eliminating the project's negative cash flow.
The operating partnership incurred $3.5 million in net master lease payments during the quarter ended March 31, 2009.