On March 2, 2010, a subsidiary of Vornado Realty Trust ("Vornado") notified the Master Servicer of the debt secured by properties in High Point, North Carolina (part of the Mart segment) that neither the subsidiary nor Vornado is prepared at this time to fund any shortfalls in debt service. As a result, we requested that the loan be transferred to the Special Servicer. As of December 31, 2009, the net book value of the properties was approximately $148.0 million and the non-recourse debt secured by the properties was approximately $217.8 million. [emphasis added]

From Vornado's most recent 8-K (thnx to our special bond-market correspondent for the pointer).

Lexicon: "The term Special Servicer refers to companies that have specialized processes in place to deal with loans that require unusual attention, i.e., currently in or about to go into default." 

Background: "Merchandise Mart Properties, Inc. (MMPI) owns and operates over two million square feet of showroom and exhibit space in six of the key market buildings in downtown High Point."

More: "Merchandise Mart Properties, Inc. is a wholly-owned subsidiary of Vornado Realty Trust. Vornado Realty Trust (VNO) is a fully integrated, publicly owned, real estate investment trust."

Comments

[Ivan Saul Cutler]

The balkanization of High Point showrooms, a vicious internecine warfare of insular owners over the years, help contribute to weakening and possibily killing a mercantile golden goose.

The old gray furniture market ain't what it used to be, and there's a reason not entirely attributable to the recession.

Lack of compelling leadership across the spectrum, in particular the warring showroom owners and operators who failed to recognize they are in the same figurative boat. Instead of rowing forward, they bonk each other with oars and consider that activity a stellar accomplishment of harmony.

The lack of visonary-minded cohesion High Point contributed significantly to the rise of the flawed Las Vegas market, whose seductive superficial neon diverted or sucked precious dollars from a weak industry, and that meant diluted investment in High Point.

The best plan for all the High Point building owners is to hire one leasing company for all showrooms under a sensible master lease and plan. But first, it demands real, head-knocking leadership.

The other element is unburdening the market authority from an unprogressive governance of competitive showroom owners who chamption and preserve mediocrity because they are fearful one of their competitors might gain some advantage. Meanwhile, everyone loses.

This is a Greek Tragedy requiring a mercantile version of deus ex machina (a solving god dropped in by a crane) to create a salutory ending that becomes a sustaining beginning for success.