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Thursday, April 19 Business

Former Stamford UBS building’s mortgage sells at deep discount

STAMFORD — The owner of the city’s largest vacant office complex has bought the distressed downtown property’s loan, but lenders will take an approximately $100 million loss on the hub at 677 Washington Blvd., according to a Manhattan mortgage-tracking firm.

Beverly Hills, Calif.-based investment firm AVG Partners has paid $54.2 million for the approximately $145.6 million mortgage, according to data from Trepp and its sister publication, Commercial Real Estate Direct. The approximately $100 million hit for lenders also reflects about $9 million in liquidation expenses.

The building includes what was once the largest trading floor in the world.

The mortgage for the approximately 712,000-square-foot-property on Washington Boulevard., which formerly housed UBS’ Stamford offices and its cavernous trading hub, went on the market in December. The loan belonged to a pool of mortgages bundled in a commercial mortgage-backed security. The property’s note, which originated in 2004, fell into default when it failed to pay off by its maturity date last October, according to Trepp.

CWCapital, the loan’s special servicer, approved the deal, according to Trepp.

“CWCapital made the decision that selling the mortgage would be the best way to minimize the loss to the lenders,” said Manus Clancy, Trepp’s senior managing director of data and research. “They (AVG) are basically paying off their obligation at a discount.”

Officials from AVG Partners and CWCapital were not immediately available to comment.

The mortgage’s price does not come as a surprise given that the appraised value of 677 Washington Blvd. had plummeted to about $37 million in January. The mortgage’s securitized balance originally totaled about $230 million.

Real estate experts have said in recent months they did not expect 677 Washington Blvd.’s plunging value to affect other properties because they said its appraisal reflected its unique circumstances.

Built in 1996 and renovated in 2001, 677 Washington Blvd. stands as the most conspicuous symbol of Stamford’s struggling office market, contributing to citywide office vacancy rates that hover around 30 percent, among the highest in Fairfield County.

A leasing team was hired more than a year ago by the borrower, but little to no interest in leasing the 14-story building has emerged, Trepp officials said.

But activity is now picking up, according to commercial real-estate firm Cushman and Wakefield, which is listing the property.

“We have a lot of people looking at it right now,” said Jim Fagan, Cushman and Wakefield’s Stamford-based market leader. “We have both types of potential users — single tenants and multi tenants.”

Business leaders and city officials have proposed for 677 Washington Blvd. a number of new uses, such as apartments, a hotel and the conversion of the empty trading floor into a convention center.

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As it shrank its Stamford presence in response to companywide struggles, UBS last year moved employees to Royal Bank of Scotland’s Americas headquarters across the street at 600 Washington Blvd.

UBS was scheduled to make its last lease payment for 677 Washington Blvd. last October, but it is obligated to maintain the building until the lease expires at the end of this year, according to Trepp.

Approximately 900 UBS employees now work at 600 Washington Blvd., where it signed a 10-year lease. Most of them work in IT and operations; none hold trading positions. The laying off of some 570 RBS employees since early 2015 has created much of the room for UBS’ relocation.

pschott@scni.com; 203-964-2236; twitter: @paulschott