The Real Deal Miami

Lehman bets on real estate to repay $300B debt

August 14, 2012 02:15PM

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From left: Jeffery Fitt, Lehman’s New York-based head of real estate and Miami's Setai Hotel

Over-leveraged real estate assets caused its demise, but in an ironic twist, Lehman Brothers is now leveraging its property holdings into repaying many of those debts. Following its acquisition of Archstone, the failed bank was the largest buyer of U.S. commercial property by value last year. Since its collapse, Lehman has acquired an additional $5 billion worth of real estate assets.

Now, as the real estate market improves and these assets recoup some value, Lehman Brothers Holdings is attempting to recover nearly $13 billion from mortgages and properties. It’s part of a plan to raise $53 billion through 2016 and pay its creditors an average of 18 cents on the dollar for its approximately $300 billion worth of debt, Bloomberg News reported. Lehman already paid $22.5 billion — 53 percent more than was previously expected — to creditors in April.

The firm recently announced Archstone’s initial public offering, an event the company hopes will kick start its recovery. However, Lehman’s strategy isn’t purely based on sales; they plan to keep select, high-revenue generating properties within their portfolio. For instance, in Miami, Lehman plans to retain ownership of the South Beach’s Setai Hotel, which it recently hired Trevi Luxury Hospitality Group to manage “The entire strategy was ‘don’t put yourself in a position of having to sell,”’ Jeffrey Fitts, Lehman’s New York- based head of real estate, said. “If you’re selling with a gun to your head and people know it, you’re dead and you will leave hundreds of millions of dollars on the table.” [Bloomberg News]Christopher Cameron