As acute as the pain has been in the U.S. housing market, commercial real estate has been no stranger to trouble. Here is a glimpse of some high-profile victims that have been claimed so far.
In the span of a little more than three years however, Stuyvesant Town/Peter Cooper Village quickly morphed from the proverbial brass ring into a white elephant as its buyers choked on the massive amount of debt used to finance the purchase. The owners – Tishman Speyer Properties and BlackRock Realty — handed over the property to its creditors in January.
However, the loans used to make those purchases became nearly impossible to refinance once credit markets started to freeze up shortly thereafter. As a result, Macklowe’s firm was forced to sell off some of those properties, including what perhaps was his most prized trophy: the General Motors building, a 50-story white marble landmark with breathtaking views of New York City’s Central Park and home to iconic toymaker FAO Schwarz as well as Apple’s flagship Fifth Avenue store. At least it wasn’t all for naught — Macklowe more than doubled his investment on the building after purchasing it for $1.4 billion in 2003.
Struggling with a difficult economic climate and hoping to raise some quick cash for its ambitious cross-town City Center venture, the casino operator sold the resort and its famous pirate battle display last March for a mere $775 million. Scooped up by Kansas billionaire Phil Ruffin, various estimates have placed the site’s replacement value at nearly four times that amount at $2.7 billion, according to commercial real estate research firm CoStar Group.
What they never anticipated, like so many other real-estate speculators, was the precipitous decline in property values and a spike in the nation’s unemployment rate to above 10%, which drastically weakened demand for office space across the country. Unable to service the debt load, the property was sold in a foreclosure auction last March for less than half of the original purchase price.
Home to a number of media and entertainment companies, including NBC Universal and Universal Music, the 36-story building and surrounding land is now jointly owned by a pair of East Coast distressed investment firms.
After a massive overhaul, the property reopened in 2008 as a hotel-condominium combination under the banner of Canyon Ranch, a well-respected name within the wellness community. That venture however would stumble yet again as a result of the recent economic downturn. Last fall, its developers handed over the remaining 300-plus unsold condos to its creditors.
Despite that hiccup, the Canyon Ranch development appears to be moving full steam ahead. More than 60 units have been sold since May and another 20 contracts are waiting to be completed, according to its current owners.
Unable to service its mortgage debt, the company lost the building in an auction last June to Otera Capital, a division of one of Canada’s biggest pension funds. The Canadian firm paid $241 million, according to CoStar Group. That’s less than half of what Macklowe Properties bought it for in 2006.
One particularly notable tale has been that of the former Maui Prince Resort, a spectacular 1,800-acre resort at the foot of Mount Haleakala that boasts 310 rooms and a Robert Trent Jones-designed golf course. An investment fund run by Morgan Stanley teamed up with a local firm in Maui to buy the property in 2007 for $575 million with the hope of developing it. Those plans quickly unraveled however as tourism to the state took a severe decline as a result of the recession.
The borrower’s original plans of refurbishing the 251-room luxury hotel however may still indeed happen. A messy legal fight over the hot
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