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Thread: Construction in Carnage

  1. #1

    Default Construction in Carnage

    WALL Street isn't the only place getting whipsawed by the bankruptcy of Lehman Brothers.

    Several commercial real-estate projects in the city now find themselves under clouds of uncertainty as borrowers holding thousands of loans provided by Lehman discover the spigot has been turned off now that the once-venerable Wall Street firm's future rests in the hands of a bankruptcy judge.

    Among the projects affected is the Nobu Hotel project at 50 Broad Street, whose investors include Robert De Niro.

    "We're one of 2,000 loans for $32 billion," said Kent Swig, president of developer Swig Equities, which has a $37.7 million mortgage with Lehman.

    Swig said no one knows when the mess will be unraveled.

    "It's a bloodbath," he said. "It's extraordinary."

    Because the accounts are frozen, Swig can't draw on the loan to pay contractors or anyone else.

    His nearby residential condominium conversion project at 25 Broad St. has also been shut down because of the Lehman bankruptcy. And at least one vendor has filed a lawsuit against the project in order to be in line if and when the money starts flowing again.

    Swig isn't alone. RFR Holdings' fabulous Shangri-La Hotel project at 610 Lexington Ave., which still has foundation work underway by Turner Construction, faces uncertainty.

    RFR has $145 million in combined acquisition and construction loans from Lehman on the site where Hines Interests is the owner's rep overseeing the daily work on the 712-foot high, 65-story glass tower designed by Lord Norman Foster.

    No one affiliated with the project would discuss whether there is equity or other funds on hand to cover ongoing costs, or if further draw-downs will also be frozen in the Lehman mess.

    RFR declined comment on the situation.

    While spokespeople were unavailable, a person familiar with the Lehman situation concurred that things are moving slowly in the bankruptcy court and that no money on any Lehman loan is allowed to be drawn out.

    Others impacted by the bankruptcy include developer Alexander Gurevich, who has one residential condo at 250 E. 49th St. that will be topping out its 25th floor in a few weeks. Architect Jeffries Sydness said work there has slowed but has not stopped.
    Another condo at 315 E. 46th St. has "slowed down more," Sydness added. Both have Lehman construction loans.

    Gurevich did not return a call by presstime.

    Eric Anton, an investment broker with Eastern Consolidated who handles many development sites, said lenders typically parse out the construction money on request from the developer and show up on-site every few weeks to take photos and make sure the money is going toward the project.

    "There is tremendous uncertainty," Anton said. "The court, the bankruptcy judge and the consultants need to decide what to do."

    With Lehman loan liens on file, the developers also can't simply take out a loan from another lender. And even if such mortgages were available - and lending has loosened in the last week or so - Anton said new loans would cost developers dearly.

    Borrowers who bought office buildings with Lehman money have varied situations. Some might have already spent some of the money on the original purchase but provided extra borrowing capacity based on leasing, so it wouldn't be sitting in their pockets.

    Or additional money may be funded into an interest-bearing escrow reserve account held by the borrower's attorney and released from time to time.

    "But you pay the interest whether or not you use it," advised one major owner.

    If all the owner/developer has is a future funding obligation from Lehman, chances are they won't get that money, advised one senior real estate attorney.

    "Most of these future funding obligations are under water," he said. "If I was [new Lehman owner] Barclays, I wouldn't want to make the loans. They can wiggle out of the loan. The world has changed."

    http://www.nypost.com/seven/10222008...e_p_134745.htm

  2. #2
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    Cry me a friggin river - this guy is crying b/c he can't borrow. What about all the creditors! This guys is an absolute s**thead. Shut up and look elsewhere.

  3. #3

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    This article was posted earlier in the New York City Commercial Real Estate Thread.

    http://www.wirednewyork.com/forum/sh...t=4949&page=67

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