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Broadway and banks talk on debt issue

BROADWAY Partners, the New York real estate investment firm that used short-term debt to buy more than US$8 billion of office towers from December 2006 to May 2007, is negotiating with its banks after missing a repayment deadline last week.

"Despite difficult market conditions, we continue to work hard with our lenders and partners to address debt obligations," Broadway said in a statement released on December 9 by Rick Matthews, a spokesman at the public relations firm Rubenstein Associates. Broadway principal Jonathon Yormak declined to comment.

Broadway, led by Chief Executive Officer Scott Lawlor, borrowed US$1.5 billion through mezzanine loans to help finance the purchases of two groups of buildings from Beacon Capital Partners LLC, including Boston's John Hancock Tower.

Broadway borrowed the money from Lehman Brothers Holdings Inc and RBS Greenwich Capital Markets Inc.

The firm's plight illustrates the challenges facing investors that borrowed heavily to buy real estate during the bubble and weren't able to refinance once the credit crisis took hold in 2007, Bloomberg News said.

Of the US$1.5 billion Broadway owed, US$724 million was originally scheduled to come due on January 6, 2008, but the firm paid a fee last year to extend the due date by one year to the current month. The remaining US$793 million was due to come due last August and Broadway had intended to extend that as well.

"They overpaid for those properties," said Steve Coyle, a fund manager at New York-based Cohen & Steers. "They may not make it."

Broadway already paid down some of the US$724 million with proceeds from asset sales. Broadway tried unsuccessfully to sell a stake in the Hancock Tower. A deal to sell One Sansome Street in San Francisco to a South Korean investor also fell apart.

Kimberly Macleod, a spokeswoman for Lehman, didn't comment. Peter Ward, a RBS Greenwich spokesman, didn't return a call for comment.


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