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Posts Tagged ‘Commercial real estate’

What do you do when a property you bought for 5.4 billion is now only worth 1.8 billion? Why you give it back to the lender of course.

Several people who track the commercial real estate market have warned of a coming wave of commercial property defaults that might make the current residential real estate problems look like peanuts. Adding credibility to this claim, Tishman Ventures recently defaulted on Stuyesvant Town & Peter Cooper Village in Manhattan and returned the property to its lenders in a deed-in-lieu arrangement.

With a loan more than double the property value, the action by Tishman makes financial sense. They are not the only ones giving property back to the banks, recently several towers in San Francisco bought by Morgan Stanley at the peak, were returned to the lender. Note the quote in the article: “This isn’t a default or foreclosure situation,” …. “We are going to give them the properties to get out of the loan obligation.”

The Huffington Post, a popular blog, contrasts the Stuyvesant situation with a borrower who is underwater on a mobile home. Entitled “Tishman Speyer Walked Away From Its Stuyvesant Town, Peter Cooper Village Mortgage. Why Can’t You?”, one has to wonder at the double standard here.

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