An Oct. 1 8-K regulatory filing with the Securities and Exchange Commission stated that Maguire has lost the deed to Los Angeles office tower Two California Plaza, which is considered a trophy asset. The company has defaulted on a $470 million loan securitized in GSMS 2007-GG10.
According to a Barclays Capital report released this afternoon, the move was "widely expected" given that MPG had previously said that it did not intend to hold onto the 1.3 million square feet building.
Barclays analysts reported that as part of the foreclosure, Maguire has received a release of all claims against it relating to the loan. They cited Real Capital Analytics data that showed that the loan is currently in REO.
Given the loan’s large size, Barclays analysts said that the longer the loan is in REO, the more considerable the appraisal subordinate entitlement reduction (ASER)-related shortfall will become for the deal. They explained that $2.4 million ASERs have accumulated in just three months while interest shortfalls are currently hitting the B tranche.
The $10 million of advances have also accrued on the loan. This will result in higher severities when the loan is liquidated.
The loan will probably take losses as the original loan was based on highly inflated pro forma valuations and the building is only 75% occupied, said Barclays analysts. They cited a special servicer commentary. This dropped from 94% in 2008.
Barclays analysts also said that the latest appraisal from early 2011 valued the property at $350 million, which might mean a probable severity of 30% with liquidation costs. The loan also faces some tenant rollover risk as PwC’s 160,000 square feet lease, comprising 12% of the property, expires early next year.