Real Estate Giant Macklowe In Danger Of Foreclosure
Nothing has been resolved as yet and talks are still on between real estate giant Harry Macklowe and his lenders regarding Manhattan office buildings. He had purchased these in the previous year. Technically the inconclusive talks place Macklowe in a default position although according to reports none of the lenders are going on with the process of foreclosure as yet. In the following week there is a chance of resumption of talks. Macklowe’s spokesperson did not comment on the issue.
In February 2007 Macklowe had borrowed $5.8 billion from Deutsche Bank to purchase seven office buildings in Manhattan area – properties that previously belonged to Equity Office Properties. Last week there had been a tentative deal that Macklowe would turn over the units which he had purchased for $7 billion. The bank declined to comment on the report.
It is alleged that Macklowe owes the bank $5.8 billion by way of acquisition financing or non-recourse. This would give Deutsche control of the buildings but not rights over the rest of the empire of Macklowe.
Macklowe, it seems, put in $50 million from his own resources but he is still short of $1.2 billion to repay a bridge equity loan he had taken from Fortress Investment Group. Macklowe purchased the units together with Blackstone Group LP’s acquisition of the Equity Office in 2007.
The crux of the problem for Macklowe is that the ongoing foreclosure crisis has all but wiped out easy debt financing. Lending has become more difficult and very expensive. The commercial mortgage backed securities CMBS, has to all practical purposes dried up. Banks are besieged by the foreclosure crisis in residential sub-prime mortgages. This has left Macklowe in the lurch. With fears of recession looming large the future is bleak for commercial real estate market.
The market cannot be studied in isolation. One leads to another and this snow balling effect of the sub-prime crisis is being felt in all spheres of the economy. There is a strong hue and cry against the lenders although there are indications that even before the 9/11 drama indications of the downtrend were visible for those who could read. There were job losses, divorces and illness. All joined hands with rising interest to create the foreclosure crisis. The government at all levels, communities and politicians are all pitching in to salvage the situation and bring back the country on its rails.
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