A Goldman Sachs affiliate is weeks from defaulting on the $896 million loan it took out to buy one of the biggest collections of office buildings in the Seattle area.
A Goldman Sachs affiliate that owns one of the biggest collections of office buildings in the Seattle area is weeks from defaulting on the 5-year-old loan it took out to buy the 2.6 million-square-foot portfolio, according to two industry reports.
Whitehall Street, a Goldman Sachs real-estate investment arm, paid close to $1 billion for the 11 Seattle and Eastside buildings in April 2007, near the market’s peak.
The portfolio — which includes Seattle’s 34-story 1111 Third Avenue and downtown Bellevue’s 25-story Symetra Financial Center and 21-story One Bellevue Center — was 96 percent occupied then.
Now occupancy is down to about 62 percent, according to commercial real-estate database Officespace.com, and the buildings are worth much less than the $896.5 million Goldman borrowed to buy them.
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Goldman’s interest-only loan matures April 9. That’s when the entire principal is due.
“The loan is not expected to pay off,” loan servicer CT Investment Management said in a March 13 note to debt holders.
Goldman notified lender representatives in December that it wouldn’t be able to make the balloon payment by the due date, credit-rating agency Standard & Poor’s said in a March 12 report.
S&P calculated the portfolio is worth about $311 million, just one-third of Goldman’s total debt. King County values the buildings for tax purposes at $513 million.
Goldman and its lenders are negotiating, according to both reports. But Seattle real-estate insiders say Walton Street Capital of Chicago — which bought a $231 million piece of the debt last year, reportedly at a steep discount — is expected to end up with control of the buildings.
Goldman Sachs did not respond to a request for comment. Walton Street representatives did not return calls.
The impending default has been widely anticipated. Credit-rating agency Fitch predicted it more than 18 months ago.
Goldman’s portfolio suffered more than most from Washington Mutual’s dissolution in late 2008. The bank had leased more than half of 1111 Third Avenue and Goldman’s smaller, neighboring Second & Spring building.
Eric Pryne: 206-464-2231 or firstname.lastname@example.org