Lenders pick favorites when deciding whether to foreclose
October 29, 2009 02:30PM
By Adam Pincus
From left: Whitney Wilcox, Isaac Zion, Howard Nottingham, Jay Koster, Steven Koppel, at last night's REBNY meeting
Lenders mulling which borrowers to chase into foreclosure will be considering not only the viability of the struggling real estate projects but also the relationship with the developers, finance experts said at a panel last night held at the Real Estate Board of New York.
While most lenders do not want to take back distressed properties and are content to extend loan terms, in certain situations they will move against the owners.
In those cases, aggressive efforts to take back properties will at times be made based on the level of business the borrower has with the lender, said panelist Steven Koppel, partner at law firm Jones Day.
"A strong bank may have more of an appetite to force the issue, especially if the borrowing entity is not a client they want in the future or is in an asset class they are not really interested in," Koppel said.
He was one of five industry professionals on the real estate finance panel moderated by Peter Hennessy, managing director at commercial services firm Jones Lang LaSalle, and held at REBNY's Midtown office.
Other panelists were Whitney Wilcox, senior managing director at financial firm Holliday Fenoglio Fowler; Isaac Zion, managing director at SL Green Realty; Howard Nottingham, executive managing director at brokerage Studley; and Jay Koster, managing director at brokerage Jones Lang LaSalle.
The panelists said that some of the government's efforts to restart lending have yielded few results.
Zion said SL Green sought to utilize the federal Term Asset-Backed Securities Loan Facility, or TALF, to finance a project, but dropped the idea because financing was better elsewhere.
"We were looking for some TALF financing for a deal but we got much better execution from some German banks and some Asian banks. And even the U.S. life insurance companies are offering better execution," he said.
While investors have been slow to use the government program, other federal laws have actually impeded foreign investors, Zion said.
"A recent Internal Revenue Service ruling is killing Singapore," investment in the United States, he said, taxing them at a very high rate. "That is why you are seeing China and Korea more active. They have a favorable tax treaty."
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Comments
Anonymous
When mark to market accounting went away so did the chance of a quick recovery to our economy. Without the change we would have forced the foreclosures, banks would have failed and we would be on the road to recovery. No banks are discouraged from foreclosing because that would me they would have to write off their losses. Instead they would rather hold bad loans on their books at par. In may respects many banks can't afford foreclosing. Foreclosing on properties would ensure the collapse of bad banks so they extend and hope to earn their way out. We must bring back mark to market or suffer with 10% unemployment for 20 years.
Comment #1 Posted By: Anonymous 10/29/09
Anonymous
This is when the old boys network takes over, and a lot of under water activity occurs. Reminds me of 1989 in the city , when only a few properties were foreclosed on, and then the bank hardly even tried to sell the property after taking possession. Remember Park Avenue Court, the old Gimbels, the developer went under, and the banks gave away the apartments to their friends. Not to mention the Trump building on 65th and third when the banks got that property. everyone wanted an apartment at a discount and the old boy network walked away with quite a few.
Comment #2 Posted By: Anonymous 10/29/09