Tuesday, December 18, 2007

Report: Macklowe Failed to Repay $500 Million Loan

by Calculated Risk on 12/18/2007 04:13:00 PM

From Bloomberg (no link yet): Macklowe Failed to Repay $500 Million Loan, Newsletter Says (hat tip Brian)

New York investor Harry Macklowe failed to pay a $495 million loan from Deutsche Bank AG to develop an office, hotel and condominium tower on the Park Avenue site of a former luxury hotel, Commercial Mortgage Alert said.
He also missed a payoff deadline for a $120 million loan on
510 Madison Ave. ...
In September, the WSJ reported: Macklowes On a Wire
Mr. Macklowe and his son Billy paid $6.8 billion to buy seven New York buildings from Equity Office Properties Trust. ... the sale was one the most expensive real-estate deals in U.S. history, symbolizing the skyrocketing prices paid for buildings at a time of cheap debt and demand for office buildings.

The transaction was emblematic of the lax underwriting standards of the real-estate boom. Macklowe Properties put in only $50 million of equity and borrowed $7.6 billion, according to the documents. (Mr. Macklowe borrowed more than the purchase price to cover closing costs and other fees.) The deal also had "negative debt service," meaning that the rents from the buildings weren't expected to cover the debt payments for five years ...
Talk about a high LTV: borrowing $7.6 Billion for a $6.8 Billion purchase on properties that have probably declined in value. Approximately $5.0 Billion of the debt must be paid off in February.