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Trepp Trading Alert: Prudential Plaza Gets Paid Off, One of Two CMBS Deals Reflects Change, Trade CB16 Very Carefully

The $410 million One & Two Prudential Plaza loan has paid off, resulting in a 100% loss to the B note. The loan, which was modified and bifurcated two years ago, was split between JPMCC 2006-LDP7 and JPMCC 2006-CB16. Because of the timing of the payoff, the LDP7 deal reflects the payment and the loss with the August remittance. For CB16, the payment will have to wait until September. Accordingly, you should trade JPMCC 2006-CB16 very carefully.

The underlying property is a 2.2 million square-foot office complex in Chicago that is comprised of two separate towers. The plaza contains the 1.2 million square-foot One Prudential Plaza and the 994,000 square-foot Two Prudential Plaza.

For JPMCC 2006-LDP7 (7.3% of the deal), the news will soon be water under the bridge. According to the August remit, the A note has paid off (with 10 months to maturity date) and the Hope note was written off in full.

For JPMCC 2006-CB16 (14.7% of the deal), the payoff must have missed the deal’s reporting cutoff. Both loans are still outstanding. This means a big prepayment is coming for CB16 next month. There is no penalty due with the prepayment.

Each of the two deals had a $168 million A note and a $37 million Hope note. According to the modification documents from June 2013, the loan was allowed to prepay freely starting on July 1, 2015.

The property saw its value reduced to $317 million last year, down from the $525 million pro-forma value and $490 million “as-was” value at securitization. The debt was restructured with a venture backed by Mark Karasick and Michael Silberberg, which pumped fresh equity into the property.

Assuming the loan pays off in September (and no prepayments or defaults for anything else), the average life of the A-4 bond goes from 0.84 years to 0.64 years. Both deals are updated to August on Trepp.

Compliments of Trepp, LLC  – A member of the EACCNY