Content area
Full Text
Olympia & York's U.S. arm is preparing to turn over two more prominent office buildings to secured lenders in its effort to restructure its $5 billion in debt without filing for bankruptcy.
But by further improving Olympia & York's financial health, the actions will help set the stage for a battle for control of what will still be the city's largest office building owner.
Olympia & York Cos. (U.S.A.) has reached a tentative agreement to return 425 Lexington Ave. to Sumitomo Life Realty (N.Y.) Inc., according to creditors involved in the negotiations. The besieged developer also has agreed to return the 40-floor building at 125 Broad St. to the Canadian Imperial Bank of Commerce, sources say.
Officials at Olympia & York and the banks decline comment.
But people involved in the company's massive restructuring effort say the decision to give up the properties reflects the business strategy Olympia & York embarked on last summer, after resolving a bitter governance dispute between its U.S. creditors and the Canadian creditors that control a majority of its stock. Since that time the company has been trying to jettison its most troubled assets, leaving it a smaller, but healthier enterprise.
The two properties clearly fall in the distressed category. The 40-floor building at 125 Broad St. is more than 40% vacant and cannot support the $277 million CIBC mortgage. Although the 31-story building at 425 Lexington Ave. is nearly 100% occupied, it also is unable to support its debt, which is close to $300 million.
Sources say that with...