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Half Of Tishman Speyer Chicago Properties Default On Major Mezz Loan, Fed's Maiden Lane Is Holder Of Mortgages
The "CRE-fail" news of the day comes from Chicago where Crains reports that Tishman Speyer has just defaulted on a major mezzanine loan, part of a $1.4 billion package of loans, in which the Federal Reserve is the the main lender via its Maiden Lane I program. Tishman-Speyer, whose 11 Chicago CRE holdings can be seen here, has allegedly defaulted on a mezz loan supporting 6 major commercial properties.
The properties, 5.7 million sq. feet in total, represent roughly half of the CRE company's 12.2 million sq. feet of Chicago real estate. And while Tishman has enough of a real estate empire that this won't make a huge impact in the near term, what is notable about the portfolio is that the Fed itself is the holder of the mortgages, which it acquired as part of the Bear Stearns bailout and currently are part of the $26.4 billion in Maiden Lane I Assets. Even as this portfolio has been impaired by over $3.5 billion since inception, we fully expect the fully transparent Fed to have a public announcement as to just how much more value in ML 1 will be lost as a result of this default.
More from Crains:
A venture led by New York-based Tishman Speyer Properties has
defaulted on part of a package of loans used to finance the
$1.72-billion purchase of six prime office towers in Chicago's Loop
during the frenzied real estate market of 2007, sources familiar with
the deal say.
The developer bought the 5.7-million-square-foot
portfolio from Blackstone Group, which flipped them as part of the New
York private-equity firm's $39-billion leveraged buyout earlier that
year of Chicago-based Sam Zell's Equity Office Properties Trust.
The
buildings, including such Loop landmarks as the Civic Opera Building
and the 10 & 30 S. Wacker Drive complex, have lost much of their
value amid the broad decline in the commercial real estate market.
Some observations on the most likely fate of these buildings:
Without a financial restructuring, the properties are likely to join
a new trend—“zombie buildings,” which can't compete for new tenants
because they lack the money to cover brokers' commissions and interior
office reconstruction.
The number of zombie buildings in the
Chicago area is likely to grow in 2010, according to a forecast by
California-based Grubb & Ellis. For landlords, the trend means even
top-quality office properties are likely to divide themselves into
“haves” and “have-nots,” with the latter seeing their vacancy rates
worsen because of the lack of financing.
Even landlords that may
have cash are hoarding it. Dallas-based Behringer Harvard REIT I Inc.,
which owns five downtown office buildings, says it is avoiding upfront
costs by cutting rents on existing leases in exchange for lengthening
the agreements. The “blend, extend and don't spend strategy” is an
effort to “conserve cash wherever possible to allow us to ride out this
recession,” President Bob Aisner said at a presentation in August. An
executive says the company is willing to spend money “for the right
transaction for the right tenant.”
What is most curious about the development is not merely the Fed's involvement but how it has responded to TBTF negotiation attempts by Tishman Speyer, which seems to believe that since the Fed will bail anyone and anything out, why not also Tishman? Come to think of it, any rational business would have done the same. And look for many more companies to approach the Fed with full bailout intentions in the future: it is now too late to pretend that Bernanke would consider letting someone, especially someone embedded in CRE, fail:
A Tishman-led venture is in default on a mezzanine loan of
undetermined size, part of an estimated $1.4-billion package of
mortgages, sources say. The loans come due next year but can be
extended until 2012, according to sources. Earlier this year, the Fed
began selling off pieces of the loans to institutional investors.
A
source downplays the default, calling it “technical,” but the Fed has
reacted sharply, effectively freezing a reserve fund. In a statement,
Tishman Speyer says, “The lenders have delayed certain capital
expenditures that already had been approved and that were required
under the loan agreement.”
The tough tactic is apparently intended to force Tishman Speyer to invest more of its own money in the deal but could backfire.
A
New York Fed spokesman says, “We are optimistic that a resolution will
be found to ensure that the properties continue to be well-managed and
maintained well into the future.”
So among its many other systemic preoccupations, the Fed is now in the business of holding mortgages on defaulted properties that are soon to become zombie building, all the while disclosing no information about the process whatsoever, and taxpayers, who are ultimately on the hook for all of this toxic garbage which will be lucky to see 40% impairments, have to learn about it through rumors and innuendos. But somehow all those Senators and Congressmen who believe S-604 is wrong, are ok with this complete lack of information.
h/t The Fugitive
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Okay, we need to reframe the problem here. These property owners are defaulting on us, the taxpayer, right? The taxpayers need to start filing bankruptcy proceedings against the US Government and demand that the defaulted assets get split up amongst us. I am cool with it that those who have paid in more taxes should get more of the shit.
If we are on the hook to pay for it, we should at least get the assets, like any bankruptcy. That's what the fucking collateral is for.
Sadly, that suggestion makes sense and adds value for the taxpayer.Since what I have discerned is that the system exists only to rape, rob and pillage the taxpayer, your suggestion is an Epic Fail.
Cistercian, I accept your judgement on this. Epic Fail it is.
I wonder what happens to a bankrupt taxpayer? You ain't got it, you ain't got it. Just like in Chicago, right? Funny how that does not work for you and me.
Isn't that the truth!
Actually it's an epic fail for the 'pillagers' themselves too. Yes, the American taxpayer is being raped. But the amount of meat on that bone is swiftly dwindling.
The taxpayer will fall first, but as we taxpaers fail, corporate earnings will also begin to fail. It's all one closed system. And that system must crash entirely before it can be fixed.
+100
Notice how everyone keeps hoping the American consumer will start pending crazily again?They killed the golden goose...the criminal psychopaths.The Epicness of the Fail is vast.
Sorry but this is a mezzanine tranche. You won't get a dime in court until the senior tranche is whole. Oh wait, Obama, a former law professor, doesn't think that capital seignority should be a consideration in his new dystopia. Maybe you will get a few dimes in return for your dollar.
The Fed shouldn't ever take mezzanine for this reason. I'm not a lawyer, but Ben may have perjured himself in describing the assets he took and the haircuts that came with them when he testified at congress.
To all that bought Gold w/ their credit cards and then defaulted, we will be coming for our gold.
Sorry, I sold it on eBay and bought some food with it.
I already ate it but Im sure there are some remnants that I could fling your way.
Sorry, off topic, but has anyone read this - http://thehill.com/homenews/house/70685-banks-lash-out-at-credit-unions-...
Looks like another bit of proof that the plan is to have a few big banks monopolize all banking. That or the Socialist Republic of the United States shall be the only source of funding for, well, anything. They collect interest, fees, and charge you taxes. How cool is that?
Mizz C: First, congrats on your initial donation to this here site and the information it provides.
Second, and not directed at you, but at the banks: F U! I just deposited 2K in my new credit union account today, and am waiting for autodeposit to kick in the end of the month, then I'm all out of BAC.
I am doing my miniscule part, but with both points here it feels fantastic.
My fiance and I have come to the same conclusion Lothar. Despite our credit rating and income our APRs have been adjusted upwards of 29% I will be immediately paying off any balanced I have with JPM and Citi and strictly doing business with a credit union which I have been a member of for sometime. These banks will never see another red cent of mine! (Voluntarily that is... government wealth distribution is another story).
lol, i went to cash my check at an chase branch. the teller told me i that was preapproved for a credit card, my response was "so what".
Starve the Beast, unless his name is Lothar. Ruff!
T-T-T-T-Tennessee!
And thanks. ;-)
I think that is a great motto: Starve the Beast!
Good work Lothar... I would too if I was in US
Way to go. I have similarly begun divorce from WFC, just waiting for the next DD to drop in the new bank and it's over.
Imagine the business ethics they will use.The people who got AIG counter parties at par deals will be running the show.That should be fun.How about 25 dollar teller fees and 10 dollar fees per ATM transaction for a start.And .000000000000025% yield savings accounts that are subject to seizure if you are a domestic extremist or read Zero Hedge.
I can hardly wait.
Like someone who commented on that link, I too say screw the banks. Their lending practices and pure greed led to their downfall. And yet as the Fed funds rate stands at .25%, lending is anemic and credit card APRs are as high as 30%. If someone is willing to lend to small business, let them! un-fucking-believable.
This could actually be bad. If you take a look at the financial reports that the Credit Unions have to file, they are generally in worse shape than the Banks. Yet there's no coverage of this.
That's a generalization of course. Some are in superb shape.
But from the ones that I've seen, generally speaking, the ones which are more open to a wide range of the public are in really bad shape.
Perhaps they are simply being more honest. But I'm really surprised there hasn't been more publicity about this.
I'm basing my observations from the Trouble Asset Ratios published by http://banktracker.investigativereportingworkshop.org/credit-unions/
Everyone ought to take a look at their financial institution there, whether it's a Bank or CU.
Where are the reports of failures then?
Zombie Buildings
Fed holds the Mortgage
Taxpayers the Bag
The Fed doesnt hold the mortgage, the Fed holds the Mezz. Bear Stearns competed hard to be in the quasi-equity pieces of Mezz that we taxpayers now own and pretend has value.
The Fed doesnt want anyone to know how much equity they called debt, they now own.
Mezzanine or Mortgage
Different name, same hustle
Taxpayer screwed
Excellent!
This is bullshit. Why are we turning on backs on Tishman when they need us the most. It's not fair that real estate is depreciating like crazy. TS did not cause this, the FED did. TS is the victim here not the taxpayers.
So SRS will continue to crater, right?
Basically Rusty. Now see if Tishman Speyer had come out tonight and said Stuytown is 100% occupied and they are receiving lease renewals at escalated rents along with all of those Chicago properties being filled SRS would go up.
Just like with FAZ. Bank of America dilutes shares by 1/8 and down she goes.
See how it works:
* Bad news up a little
*Terrible news up alot
* "Good" news up 200 points
*Defaulting nations up 500 points
*It is a race to keep up with inflation and that ever expanding money supply.
+1 from an idiot who entered the weekend long FAZ and DRV
I'm with you - ouch. Now if we could only get a pullback for just one or two fucking days to allow me to dump my old positions without taking another fk'n loss. Is that too much to ask?
I'm with you - ouch. Now if we could only get a pullback for just one or two fucking days to allow me to dump my old positions without taking another fk'n loss. Is that too much to ask?
You'll need to file your request in triplicate with the PPT. Be sure to use red ink. I'm hoping the recent dollar/equity inverse relationship snaps back despite the market machinations Friday. I feel like the guy at the poker table trying to figure out who the sucker is.
Usually, when you're looking around trying to figure out who the sucker is....
brace yourself
the sucker is you.
Wow, you sure picked up on the subtly of the previous poster didn't ya? Concidering your depth perception, I'd stay "Anonymous" if I were you.
+10 and I'll add a "fuck off" directed at Anon.
FAZ will be back to 40 sometime between next week and early 2010....
I hope so but I just don't know anything anymore. If bad news is good news for equity then why would this happen? The only way would be if the dollar carry trade came unhinged. I think that would happen as 7750 on the DXY as suggested by an earlier ZH post.
short term, the kuwait bail out on citi may help.
mostly i would say patience.....it'll come
BAC diluted its shares by 12-13% and the stock is up 10% for the week. The horror . . . the horror!
DH, you might get your wish on FAZ, breakout next week, possible.
Massive short squeezes. CRE is easier to manipulate than banking index.
Ah, but not so fast.
CRE is not a populist derivative, hence no bailout. The property will devolve to the lenders, who in the last effect will be the institutional portfolios; pension, insurance, et,al.
The populist treat will be for this economic sector to fail. Big money needs punishing, the eventual outcome being governmental control via oversight of the financial intermediaries.
Socialism in action, nationalization through the back door. What a great country!
Not so fast, Mr. not so fast knuckles,
"The property will devolve to the lenders, who in the last effect will be the institutional portfolios; pension, insurance, et,al."
Now these failing should get you some populist rage.
"You have $500,000 in your retirement account, hypothetically. But not really. All we have are these crummy buildings we can't mark to market or we will have to admit to you that we lost all your money."
Nice.
Crank up the printing press. First to refloat the home ATM, then to bail out the pensions.
In all seriousness, letting banksters take their hit, or retirees, which one will cause more rage? FWIW, I know this is too simplified, some of these pensions are just wrong.
True, MC. Main Street sheeple see their personal numbers and cash their checks. They do not see or generally understand the underlying assets that created the sustainability of the numbers....even despite the sampling evidence they may drive by on a daily basis, namely the empty homes and zombie buildings. Too many believe that's just some fat cat's problem.
No way we can have a 40% downturn in real estate values without that reality kicking the shit out of Main Street, property owner or not. Today we are getting slapped around. Tomorrow comes the steel-toed boots.
The only way out is quickly reinflating the bubble in a balloon that is torn to shreds. Not likely near term.
Fed impunity
Funded enemy coffers
Venom vitriol
Find it a bit humorous that the 10 & 30 building houses elements of the CME.
From the link above: http://www.tishmanspeyer.com/properties/Property.aspx?id=213
"This block-long complex totaling over 2 million square feet and overlooking the Chicago River consists of two 40-story trophy towers connected by the Chicago Mercantile Exchange offers large, accommodating floor plates and an abundance of on-site amenities."
A satellite office of the old Euronext-LIFFE exchange used to occupy some of the 1 N. Franklin building. Just sayin'.
"...Tishman has enough of a real estate empire that this won't make a huge impact..."
Tishman Speyer appears to be near default on a bunch of major properties, most notably "Stuyvesant Town" in NYC.
(How big is their empire: "...closely held Tishman Speyer’s empire, which is valued at more than $35 billion and stretches from Brazil to Germany to China. Notable Manhattan holdings include the Rockefeller Center and the Chrysler Building.")
So Tishman defaults on the home of free market capitalism (10 and 30 Wacker, the CME) and the Government (Fed) is playing hardball with their mortgage.
It's official, we're France.
All I want for Christmas is for the Fed to eat shit and die
At least there should be some new job listings
at the Fed. Zombie Building Maintenance
Technician I. Zombie Building Maintenance
Superwisor. Zombie Building Security Guard.
Hey Mom I got a job at the Federal Reserve!
What do you do? I ducktape broken windows now
instead of rebooting windows.
Sounds like a casting call for Dawn of the Dead.
MsCreant, you just made a big Moldavian boy blush. LOL
From my experience guys, I think the next step Mugabe Jr. Administration is going to take is to force banks to start lending which in turn is going to unleash inflation, and down the road hyper-inflation. I have seen this movie before and it ain't pretty.
How's that Fed owned mall doing in Okalahoma?
Real life with the Fed is still out-funnying Stewart and Colbert's writers.
A Fed sitcom is such a great idea...Or just a comedy news show dedicated to their activities and issues.
I am kinda hoping that idea is a spin off... Ya know? Perhaps someone like WaterWings can do the first few episodes. Perhaps from the garage setting we have come to adore. I can dream, can't I?
"Ben's World".
Party on Garth.
Ben and Tim's Most Excellent Indenture.
golf clap!!
using the pro's bat with inflatable balloons as a backdrop... perhaps replacing the bat with a like prop...
That is entirely TOO funny.
That one definitely goes to 11 on the funny scale.
"A Fed sitcom is such a great idea...Or just a comedy news show dedicated to their activities and issues."
... like the 'public' release of FOMC decisions ??
Or like CNBC ~ Criminal Narrators Boosting Crude ??
ooohhh, how about a spin-off: the 'public' release of FOMC minutes !
Now those are some great comical ideas.
I'd be willing to bet a milkshake that almost every self-described "investor" (lol) and "trader" (snicker) would tune in each and every time for scripted, meaningless drivel, that is little more than a public parade of make-believe / blatant obfuscation for the masses, in which damn near every single 'punchline' is not only punctuated by a terribly lame joke (think inflation concerns, HAHA) but is also distinguishable from a mile away (kinda like the "comedy" Friends (urgh, barf) or Jerry Seinfeld trying to 'act' anywhere but on Curb !!
For a perfect example of tactical strategery please juxtapose not only the comments of but also the public interpretation to new (non-voting) Fed lackey Bullard, from yesterday with those released a month or so ago. Click anywhere within the first 71.xx% of this sentence for the RANsquawk note that we noticed yesterday at around 13:00, scrolling across the right side of Zero Hedge. And thanks again to ZH for providing us all with the excellent news wire / feed aggregator that is RANsquawk.
... virtually everyone believes that the Fed is omnipotent ... when in reality they are THE uber / ultimate Three-card Monte dealer, with ABSOLUTELY no power whatsoever to either define or develop true trend; 'they' can only help continuate an already existing trend and 'they' have NO actual power outside of helping anal-ysts, like myself during off-peak hours (ONLY) with a lil bit of reading material, which allows astute technicians / critical thinkers to infer MUCH from their ENTIRELY OBFUSCATORY methods, which have only been publicly 'admitted' via tertiary and indirect example by the BoE's Mervyn King in a 2002 interview, where he detailed the exact playbook, which both he and Uncle Ben each continue to operate from today.
thanks for the slow-pitch softball setup, MsCreant; owe ya one for it. ought to compile some of these thoughts / regurgitations into a formal article sometime over the next few days/ weeks. as always, this is merely semi-educated personal opinion, which, at the end of the day is nothing more than just personal speculation during off-peak hours; where funny-mental (fundamental) anal-ysis ought be relegated by any trader. have a good sunday and a great session tonight/ tomorrow !
deadhead threw us both the easy pitch. Laughing, mocking, not very effective, but it is a good way to channel rage that has no where effective to go, for the moment.
But you're right, MSM IS a running joke.
Guess they laugh at us (as they bend us over) like we laugh at them.
Just imagine if this inwestment by the inwestors at our central bank is working out so well what kind of returns all those frequent flier miles that have been exchanged for treasuries is gonna fare.
These zombie buildings can become homeless-ready Obamavilles.
Hope they keep the lights on for us.
They'll probably be turned over to ACORN.
Stu Town and the Crysler Building will look like this before too long:
http://www.citrusmilo.com/mcs/depot01.cfm
That's really sad. That's a great building.
Many of the great railway stations are still preserved. A sad testimony is this to the carnage in the Motor City.
Big Steel got crushed in Pittsburgh and the City came back bigger and better and more beautiful than ever ( yes, Pittsburgh is a beautiful town ).
Big Motors ....not so good. Hope it doesn't spread.
I should have defaulted on my mtg also but sold in 08 for profit, now paying rent each month as people sit in Foreclosed homes not paying anything. They are rewarding specualtors and deadbeats.
Manage your finance properly pay 2k per month.
Default on your mortgage Live for free.
This is Socialism at its worst.
As for CRE Lehman and BSC went bankrupt two years ago and these issues are just coming to surface now?
Going to many more Banks going away.
Housing, CRE, Stocks Bonds, Nothing is worth what they are priced at now.. by dragging out the liquidation process the economy will be stuck in Low FOR YEars!]]
Way to Go !
L
The FRB is not part of the US government. The FRB has been remitting 20 to 35 Billion a year to the Treasury. The question is how much of loss the Fed will have in all of their investments, and how long it will take to pay it off.
By the way, the FRB is now more leveraged than Citigroup?
The battered bulls of SRS should get some relief.
Keeping my eye on SRS for sure.
...yeah. I'm stuck in it. Trying desperately to get out of it.. It's been ass-fucking me for almost a year now. I would love to know I can get out intact but I'm running out of belief. BEWARE.
From someone who is currently SRS's bitch.
2X OUCH!
If prime real estate in Chicago is defaulting when occupancy is in the high 80s, we have more serious problems than I realized. I knew things were bad, but if you can't break even at 87% occupancy, your capital structure has serious problems (ie not enough equity).
The issue is that, with the equity so far out of the money, why would Tishman ever put in new money to make the rationale decision for the entire capital structure? They are OTM option owners at this point with the ability to cause the company to take undue risk (eg taking on a high risk tenant at no upfront cost instead of a high quality tenant with some upfront cost).
It is time for the fed to foreclose and sell off the property, no mater what short-term impact it has on reporting. Will be interesting to see if the fed makes the highest dollar decision or if the debt-fueled, management fee-fed monster that is Tishman is able to push out reality into a future quarter.
These bond charts are all permanent links on the right side of my blog...Sign up as a follower and then in your "reading list" you can see every time I do a new post. If you haven't checked out the "reading list", get on it. Its very useful.
Here they are all screen capped for your convenience.
1 Year treasury yield<br>
TBT<br>
JNK<br>
LQD<br>
TLT<br>
http://oahutrading.blogspot.com/2009/12/bonds-as-indicators-5-charts.html
There are still some corporate CME offices at 10 & 30 and a CME museum type place at street level. The CME started as the Chicago Butter and Egg Exchange and was always the red headed step child of Chicago Exchanges until 1972 and currencies on the IMM. I worked for many years on the Floor. There ain't no mo flo there- it's at 141 W. Jackson Blvd. The CBOT building is almost 100% occupied because people left Wacker Drive when the floor moved. That building was owned by the CBOT members, but is now, in a cruel turn for old CBOT'ers, owned by CME Group.
You see the CBOT Building "star" in the last Batman.
Zell's office is accross the River from the Opera House and the old Merc, on the 3rd floor of the Chicago Daily News Building. He has a patio to look out on them and laugh, now he doesn't own them!
So thinking in the spirit of Christmas, I was worried about all those Investment Advisors out there who might not get enough of a bonus. After all, their cheerleading has helped this unbelievable recovery. Then I thought...hmmm....they stole the taxpayers money, and then after continuing on a path of systemic risk, they are going to reward themselves with record bonuses, while many go hungry, homeless, live in fear of the future.
So, consider the following letter which you can use to send to the investor representative and CEO of your favorite bankster.
Gentlemen and Ladies,
In light of the fact that excessive leverage and speculation has again been under taken by those who do know better, and has again put our country and it's citizens under a strong threat of systemic risk.
In light of the fact that 14% of all homeowners are missing their mortgage payments or are truly already in default, directly related to predatory lending practices.
In light of the fact that irresponsible "investing" advice has led to a massive transference of wealth which is nothing short of outright thievery.
In light of the fact that the monetary policies of the Fed, as enabled by vested interest financial institutions, and furthered by hundreds of millions of dollars of lobbying with the clear goal of corrupting the system, has resulted in a massive loss of purchasing power of our US dollar, thus penalizing those who have worked and saved responsibly, and rewarding those who engage in overly risky behavior.
In light of these facts, I believe it would be inappropriate for any US financial institutions to issue any large bonuses to their employees. The greed and arrogance that would be represented by such a handout will be met with the following action:
If any employee of your company receives more than $30,000 bonus this year, I will be closing my accounts with your institution on January 10, 2010. I will transfer all assets to financial institutions that did not exceed the $30,000 bonus price cap.
Please respond as to your intentions.
http://oahutrading.blogspot.com/2009/12/letter-to-your-investment-advisor-vote.html
Toxic assets, zombie banks, zombie buildings... What a terrific picture of America for the little frenchie I am. What about the people (not those reptilian aliens of GS or JPM). Are we all going to become zombies too?
No worries at all.
One of the buildings can be used to house BHO's Presidential Library.
Another building can be uses to house BHO's office (after he leaves the Presidency).
I am sure the US Government can move enough Federal workers into those buildings to make them 100% occupied.