The September remittance report for the MSC 2007-HQ12 deal showed that a "noteworthy" loan modification was done on one of the larger delinquent loans in the CMBS universe, according to Bank of America Merill Lynch analysts.
Analysts added that the modification might have some implications for the super-senior classes of this transaction, which could extend out as a result, analysts said.
According to BofA analysts, the Columbia Center loan is collateralized by a 1.5 million-square foot office building in Seattle Washington. It is also the tallest office tower in the Pacific Northwest.
Beacon Capital Partners purchased the property in April 2007 for a reported $621 million. Analysts said that at the time of securitization the appraised value of the property was $648 million.
The securitized portion is worth $380 million or 20.2% of the HQ12 offering. This is in the form of two notes — a $300 million A-1 note and an $80 million A-2 note.
Additionally, the original loan documents showed that at the time of securitization there was $480 million worth of debt on the property comprising two B-notes, which totaled $100 million, that are held outside the trust.
Although the original documents mention two B-notes, the modification notes indicated that there is only one B-note, which is the B-2 note. It is not clear, according to analysts, if the B-notes were restructured or part has paid off.
The loan became delinquent in March and was reported as 90-days delinquent even as of the September remittance, they said. The P&I advances were worth $11.3 million based on the September data. The property was appraised at the end of March at $330 million and has been accumulating ASERs as a result.
The BofA Merrill analysts have highlighted the loan modification rise and how these, together with accelerating liquidations of other problem loans, have begun to slow the rise in the overall conduit delinquency rate.
The way loans are getting modified, they reiterated, is not always clearly or completely spelled out and analysts hope that servicers will begin to offer more data on these issues.
In terms of the Columbia Center modification, analysts said this has several parts. There's the maturity extension where the original maturity date has been extended by three years from May 2012 to May 2015. Additionally, the borrower will have two added one-year extension options that could push the ultimate maturity out to May 2017.
When it comes to the deal's reserve fund contribution, BofA Merrill analysts said that the borrower will make an initial $30 million contribution to a reserve fund.
Also, the borrower will also contribute an added $19.2 million to the reserve fund, divided into four separate installments of close to $4.8 million each.
Those added four payments begin in January 2013 and will happen every six months, BofA analysts said.
