The foreclosure crisis has hit Boston's most famous building. The John Hancock Tower will be auctioned off to the highest bidder next month after lenders moved to foreclose on owner Broadway Partners, which has defaulted on some of its debt payments on the building and two others it purchased in 2006. A group of Hancock lenders kicked off the foreclosure process Friday by hiring a New York firm, SL Green Realty Corp., to arrange for the auctioning of the building on March 31. Only a last-minute deal to extend the loans on the building could prevent it from being sold. An executive with Broadway Partners of New York said those negotiations are ongoing. "We continue to own the [Hancock] and are having an open dialogue with our lenders at this difficult financial time," said Jonathon Yormak, a principal at the New York firm. The move to auction off the Back Bay landmark, a prized asset once thought immune to the economic downturn, is a towering symbol of the turmoil that continues to ripple through the nation's largest banks and real estate companies. The Hancock is now estimated to be worth between $700 million and $900 million, a sharp drop in value since it last changed hands two years ago. Broadway Partners purchased the building in December 2006 for a record $1.3 billion - much of it borrowed - making a bold bet that its value would continue to rise as red-hot office rents in Boston escalated to $100 a square foot and beyond. But last fall's financial tumult set off a chain of events that left Broadway facing a deadline to repay a mountain of short-term debt. With the economy slowing and office rents falling, the company's owners could not generate enough income to meet its debt payments, and jittery banks were not willing to refinance such a massive transaction. "This is happening in every major city where deals were capitalized this way, with lots of short-term, highly leveraged debt," said Bob Clifford, partner at the real estate investment firm Goedecke & Co. In January, Broadway defaulted on some of its debt, leading to a series of negotiations among multiple lenders that own interests in the Hancock. Those talks resulted in a move late last week to call for an auction to sell the building and two others Broadway bought, in Los Angeles and Washington, D.C. SL Green has hired the investment bank Eastdil Secured to market the Hancock and the other office properties in advance of the auction. In a statement yesterday, a spokesman for SL Green said: "Tenants of the affected properties can be assured that Green will focus on working with Broadway to maintain property operation and tenant service standards during the pendency of this legal process." Real estate executives said the pool of possible buyers for the building is limited because of tighter underwriting standards and the difficulty of raising capital in the down economy. Current lenders in the building could be in the best position to own the Hancock. Two of those lenders, Normandy Real Estate Partners and Five Mile Capital Partners, have previously asserted that an appraisal of the Hancock determined that they own a controlling portion of the building's debt, which was divided among multiple parties. Because of that position, Normandy and Five Mile have the best opportunity to buy out other lenders and take control of the building. A spokesman for Normandy declined to comment yesterday. Executives with Five Mile could not be reached. Other lenders on the building, including Petra Capital Management, BlackRock Inc., and RBS Greenwich Capital, a unit of Royal Bank of Scotland Group, declined to comment yesterday. Another lender, the John Buck Co. of Chicago, could not be reached. As those firms battle to protect their investments, real estate professionals said the struggle is but one example of a trend that will affect trophy office properties across the country during the next couple of years. "Everyone's attention is piqued by this because the Hancock is such a signature tower," said Greg Vasil, chief executive of the Greater Boston Real Estate Board. "But many other properties are facing this same situation."
2 years ago, this would make the front page of every newspaper in the country. Now, we're so used to seeing these things daily, it's lucky to make page A7. We've become immune and desensitized to the rate and degree of our decline.