After losing more than half of their value from the September 2007 peak, Manhattan office properties have recovered to 2006 levels and remain about 20 percent below the top of the market, Green Street Advisors Inc., a real estate research firm, said Jan. 6. Overall commercial property values in the U.S. will be at current levels or slightly lower through 2014, Moody's Investors Service said in a December report.

New York Finances 350

Vornado, which owns more than 100 million square feet of U.S. properties, acquired the 538,000-square-foot (50,000- square-meter) tower at 350 Park Avenue in December 2006 for $541.5 million. The building was one of several in Midtown Manhattan that were bought for more than $1,000 a square foot during the property boom.

When faced with a $430 million loan maturing this month, Vornado got $300 million from New York Community Bank and paid the difference in cash, according to a person familiar with the deal, who declined to be identified because they weren't authorized to speak publicly. The original loan was packaged into securities by Wachovia in March 2007.

"There is a long line of people who are willing and able to recapitalize trophy assets," said Harris Trifon, global head of commercial real estate debt research at Deutsche Bank AG in New York.

'Better-Than-Expected'

The result for bond investors was a "better-than-expected resolution, given the sponsor's decision to fund the gap with cash," said Tcherkassova of Barclays.

Mark Semer, a Vornado spokesman, declined to comment.

In December, New York City developer Solow obtained $625 million in financing from Deutsche Bank to pay off $500 million in five-year debt scheduled to mature next month on 9 West 57th. The property, with its panoramic views of Central Park, commands some of Manhattan's highest rents. Some of the maturing debt was part of the same $7.9 billion deal sold by Wachovia that included Vornado's 350 Park Avenue loan, Bloomberg data show.

High-profile towers became more prevalent in commercial- mortgage bond offerings as deals became larger and Wall Street banks gave borrowers the most favorable terms, such as assigning property values based on projections of future rent growth, according to Tcherkassova.

Issuance Plummeted

Sales of commercial-mortgage bonds reached a record $234 billion in 2007, Bloomberg data show. Issuance tumbled to $12.2 billion in 2008 as credit markets seized. The market stayed shut until November 2009. Banks arranged $28 billion in 2011, compared with $11.5 billion in 2010, Bloomberg data show.