$98.4 million for a $164 million mezzanine loan, or 60 cents on the dollar, according to UBS research. But that discount has been widening.įor instance, Ashford Hospitality Trust Inc., a Dallas real-estate investment trust that invests in hotels and commercial real-estate loans, in July paid Wachovia Corp. Last spring, securities firms and banks were able to sell commercial real-estate debt for discounts ranging from 5% to 20%, small compared with many residential mortgage securities. Godbold emphasized that the bank has adequate capital to offset possible losses from its home-builder portfolio. President of Bank of America's commercial real-estate banking, in an interview. , about half of its $13 billion home-builder portfolio are loans that "we are watching and paying special attention to, because there could be structural deficiency or a market deficiency," said At the nation's largest construction lender, Commercial property values haven't deteriorated as much as homes, thanks to the still-healthy cash flows of most properties, lack of overbuilding and low default rates.ĭelinquencies have been mounting in loans tied to construction and land development, a major commercial real-estate category. "Every day that goes by there will be more pressure on pricing."įor most of this year, commercial real-estate debt has held up better than housing-related debt. In markets with apartment buildings that compete with Archstone, "there is no question that if you need to sell assets, you will try to get ahead" of the Lehman selloff, saidĪ real-estate analyst at UBS. It has sold some complexes but not as many as it hoped, according to a person familiar with Archstone. It resisted for months lowering its prices, even as buyers balked. For months, Archstone had tried to sell assets to reduce debt, but met mixed success. Treasury notes and the CMBX, a credit-market index that tracks the value of the bonds.Īpartment-building investors also are likely to feel significant pressure to sell as Lehman unloads its debt and equity pieces of the $22 billion purchase of Archstone, the large multifamily company with buildings concentrated in Washington, D.C., California and New York City. The prospect of that getting liquidated sparked the latest selloff in the CMBS market, as evidenced by widening spreads between the benchmark U.S. The firm was one of the most aggressive lenders on Wall Street, making whole loans, bridge loans and packaging debt into commercial mortgage-backed securities, or CMBS.Ībout $4.3 billion of Lehman's $30 billion portfolio consists of securities. Lehman's collapse was the most dramatic sign so far that the financial crisis sparked by residential real estate is spilling over into office buildings, strip malls, hotels and other commercial real estate. "Those assets are marked where they can be sold." "It sure doesn't feel like the real-estate markets are improving anytime soon, and we will reduce that class going forward even if we think they are good assets," said Goldman Sachs Chief Financial Officer
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