Westbrook in default talks with bank over NYC office

Westbrook Partners is in talks with its lender Barclays Capital after defaulting on loans backed by the New York office property, 475 Fifth Avenue.

The New York-based private equity real estate fund manager recently defaulted on floating-rate loans secured against the office. Reports have suggested the firm will soon surrender the keys on the 250,000-square-foot building. Westbrook declined to comment.

People familiar with the situation told PERE the firm was still in discussions with Barclays, which provided a $100 million senior mortgage and about $50 million of mezzanine financing. Sources said Westbrook and its operating partner, developer Moinian Group, invested around $18 million in equity into the deal, much of it coming from Westbrook.

The pair bought the property in April 2007 for $160 million, according to property data provider Real Capital Analytics. The firms intended to redevelop the property and lease the renovated office space at higher rents.

However, the collapse of the real estate markets has dented those ambitions. Since the deal was struck, loan reserves have been depleted with Barclays asking for additional equity to be injected into the deal. According to sources, Westbrook has refused but is still in talks with the lender.

The property was acquired through Westbrook’s $885 million Westbrook Real Estate Fund 6, and according to people familiar with the matter, represents a “small component” of Westbrook’s investments.

Earlier this month, Westbrook withdrew its legal bid to acquire the freehold of the prestigious London residential complex, Dolphin Square, amid falling property values.

The firm bought a 27-year leasehold interest in the Westminster property for around £176 million in 2005. The freehold has always belonged to UK insurance company, Friends Provident. However, under UK legislation passed in 2002, individual owners of leasehold interests in a block of flats can join together to force a landlord to sell his freehold interest.

Westbrook lodged such a legal claim in 2007, but since then property values have declined dramatically in London, meaning Westbrook could potentially acquire the freehold for less money by withdrawing this claim and filing another one at a later date. Sources said Westbrook was keeping the situation under review.