The $74.5 million mortgage connected to the One Seneca Tower has been shifted to a financial work-out specialist firm whose niche is in major real estate holdings.
According to U.S. CMBS Daily Special website, Berkadia Commercial Mortgage, which held the loan covering the 38-story downtown Buffalo landmark, shifted the mortgage to CW Capital Asset Management, a special service of potentially troubled real estate loans and holdings.
CMBS cited "imminent default" for the switch to CW Capital. The transfer was reported on Nov. 5.
Citing confidentiality clauses, a CW Capital spokesman declined to comment on the deal.
However, Steve Fitzmaurice, Seneca One Realty LLC chief operating officer, said the loan transfer was not unexpected. Seneca One Realty, a New York based investment group, bought the building in 2005.
"This is just one step closer towards determining the future of the building," Fitzmaurice said.
The 851,000-square-foot building has lost two main anchors, HSBC Bank and the Canadian Consulate in the past year and later this month, its third anchor tenant, Phillips Lytle LLP, will be leaving for the One Canalside Building. With that trio gone, the tower will be nearly 95 percent vacant and facing an uncertain future.
HSBC leased portions of 22 floors, or approximately 650,000-square-feet, in the building. Its lease expired on Oct. 31.
The Canadian Consulate leased 25,000-square-feet spread over two floors and Phillips Lytle leases 85,000-square-feet.
That Berkadia Commercial Mortgage shifted the loan to CW Capital is not surprising, said several local attorneys who specialize in commercial bankruptcy issues.
"Servicing companies are often times employed to help manage distressed loans, or those loans that are in danger of becoming distressed," said Morris Horwitz, a prominent local commercial bankruptcy attorney.
Garry Graber, a Hodgson Russ LLP partner, and bankruptcy specialist agrees.
"I can only surmise that it (the loan) was moved as a result of the cash-short position the building finds itself in, having lost most of its tenants," Graber said.
The shift does not mean that Seneca One is behind on its mortgage payments. It may be more of a pre-emptive move to an anticipated ownership or scenario change.
Seneca One does have a major balloon payment due on the tower in February 2015.
With the building virtually empty, save for a handful of remaining tenants, Seneca One representatives have been working with Buffalo officials on various development scenarios for the towering structure that dominates the downtown Buffalo skyline. Earlier this year, a team of experts from the Urban Land Institute suggested some form of mixed-use tenant composition may be its best option. Possible options could include a residential component, a hotel, restaurants and some Class A office space.
Any future development scenario would likely require a heavy public sector subsidy or abatement package. Neither the City of Buffalo or Erie County have committed to a firm incentive offer, both citing they want to see a definitive development plan.
The building, formerly the One HSBC Center, was constructed in 1970. It is Buffalo's tallest office building.