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.”