Posted by: Connie Yee
March 30 (Bloomberg) -- Boston’s John Hancock Tower, the tallest skyscraper in New England, may be sold to lenders led by Normandy Real Estate Partners for about half the $1.3 billion paid in 2006 by Broadway Partners, which defaulted on its loan.
The building will go on the auction block tomorrow in New York under state rules that govern mezzanine loan foreclosures. Mezzanine loans are intended to fill the gap between a first mortgage and the borrower’s cash down payment.
While mezzanine lenders seeking to foreclose must hold an auction of ownership interests, they start out ahead of other bidders because they are credited the unpaid balance of their loan as part of their bid. Normandy controls about $472 million of loans on the Hancock Tower, according to people familiar with the financing, who asked to remain anonymous.
“By the time the process gets to a public auction, the most likely winner will be the senior-most foreclosing mezzanine lender,” said David Furman, a real estate partner at law firm Gibson Dunn & Crutcher. “It is allowed to credit bid the amount of its loan; therefore, it can usually outbid everyone else.”