Is Walking Away Right With A Commercial Mortgage?
What happens if you borrow billions of dollars to buy real estate and then get foreclosed?
It’s just a guess, but I bet you don’t get harassing phone calls or threats that your stuff will be on the street by Tuesday. Instead, you get a foreclosure notice such as the one below.
How did this happen?
In 2007 Tishman Speyer Properties and BlackRock Realty bid $5.4 billion to purchase Manhattan’s Stuyvesant Town and Peter Cooper Village apartment complexes. This was a very big deal, involving some 80 acres of land, 110 buildings and more than 11,000 apartment units just a subway ride away from some of the best addresses in the world.
But according to the New York Times, this year “the partnership that bought the 80-acre property on the East River announced on Monday that it was turning the keys over to its lenders after it defaulted on its loans and the value of the property fell below $2 billion.” (See: Wide Fallout in Failed Deal for Stuyvesant Town, January 25, 2010)
The purchasers in this situation have substantial other assets, they’re certainly qualified and sophisticated investors, and so it will be interesting to see if the lenders seek a deficiency judgment to make up for any losses on their loan.
Meanwhile, what about other owners who are upside-down on their mortgages? The obvious question is this: If big investors can walk away from their loans, just turn in the keys, why not homeowners?
Just asking….
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