The Real Deal Miami

Lehman makes risky property investment

August 04, 2010 06:30PM

237 Park Avenue

Lehman Brothers Holdings, brought down in part by its huge property investments, is reinvesting in some of its existing deals on a bet that commercial property markets are bottoming out, the Wall Street Journal reported. Since the investment bank’s collapse in September 2008, Alvarez & Marsal — the firm overseeing Lehman’s bankruptcy — has reinvested more than $1 billion in apartments, office buildings and other commercial property around the country already owned or financed by Lehman and facing varying levels of distress. One of those properties is a 21-story office building at 237 Park Avenue. In 2007, Lehman originated $1.23 billion in loans to finance the purchase of the tower by Broadway Partners, retaining $437 million of the debt on its own books. Lehman also has spent nearly $1 billion to pay off partners and creditors and reach other settlements that resulted in the return of real estate assets to the firm. By investing more money into these deals, Alvarez & Marsal is hoping to salvage the maximum amount from the $14.4 billion of commercial real estate on the bank’s books. However, the success of this strategy depends in many cases on property values rising, something that is far from certain, given the tumultuous real estate market and the country’s weak economic recovery. [WSJ]