US Bank Tower at Risk of Loan DefaultFriday, December 14, 2012
Downtown’s landmark U.S. Bank Tower could be heading for loan default.
Part of the $260 million debt on the building, owned by downtown real estate investment trust MPG Office Trust Inc., on Thursday was sent to special servicer LNR Partners Inc., which represents debt bond investors in modifying loans or foreclosing on properties, according to a report from Trepp LLC, an securities analytics company in New York.
A $65 million loan, originated by Morgan Stanley in 2003, was sent to LNR. Trepp reports that MPG is up to date with its payments, and has only been delinquent twice in life of the loan. However, the 1.4 million-square-foot building is less than 60 percent occupied and is not generating enough income to cover the debt payments in the future.
If the building goes into default before June, MPG may be forced to pay millions of dollars to ousted company founder Robert Maguire III under a legal tax technicality that is scheduled to expire next year.
MPG, which has an 8.2 million-square-foot portfolio that includes other downtown buildings including the Gas Co. Tower and KPMG Tower, has been struggling with a mountain of debt it acquired while rapidly expanding at the height of the market last decade. It has been selling off non-core properties outside of downtown to help pay off some of that debt.
The company hired brokerage Eastdill Secured this year to seek investors or possibly a buyer for the company.
At 72 stories, U.S. Bank Tower at 633 W. Fifth St. is the tallest building west of the Mississippi River. It was built in 1989 by Maguire.
MPG shares closed down seventh-tenths of a percent at $2.85 on Friday.
MPG did not return calls.