Tishman defaults in $1.7B Chicago deal
A Tishman Speyer venture is in default on a mezzanine loan that was part of a $1.7 billion purchase of six Chicago office buildings comprising 5.7 million square feet, which marked the largest real estate deal in Chicago history, sources told Crain’s. Tishman bought the package of mortgages in 2007 at the top of the market from Blackstone Group, which flipped it as part of a $39 billion leveraged buyout of Sam Zell’s Equity Office Properties that year. Tishman is negotiating with the Federal Reserve Bank of New York to rework an estimated $1.4 billion in loans, set to come due next year, according to sources, and in response to the default, the Fed has frozen a reserve fund. “The lenders have delayed certain capital expenditures that already had been approved and that were required under the loan agreement,” Tishman said in a statement. If the buildings cannot get refinanced, they could become part of the growing wave of “zombie buildings,” which lack the money to cover brokers’ commissions and reconstruction.