Brookfield Properties is launching foreclosure proceedings on Tishman Speyer's office portfolio in the Washington, DC area, according to a recent article in the Wall Street Journal.
Tishman, according to the report, is pushing back, with plans to restructure its $570 million in debt for the 20-building portfolio. DAI could not reach the firm for comment by press time. However, a Tishman spokesperson told the WSJ that the company is confident it can implement a restructuring to maintain its ownership.
Tishman has not settled on an exact strategy as to how it will do this, a source tells DAI. However, it is going to happen within the next two months. The company issued a general statement that accused Brookfield of trying to pressure its ownership group by starting the foreclosure proceedings.
"The portfolio has terrific assets and we are not surprised Brookfield wants them, ' the statement noted. "That said, we have the funds needed to restructure the portfolio debt and we're confident that we can implement a restructuring that will maintain our partnership's ownership:'
In February, Brookfield Properties acquired the debt associated with Tishman's DC portfolio. Brookfield was reported to have bought the debt in a loan-to-own structure that would give the company significant leverage in the restructuring process, possibly allowing it to buy assets if they are auctioned off in a bankruptcy.
Last summer, Tishman defaulted on the 6.3-million-square-foot, 28-asset CarrAmerica portfolio, which it holds in a partnership, after acquiring it in 2006 for $2.6 billion. The partnership violated covenants on $200 million in its revolving credit line. The joint venture term loan and revolver debt totals approximately $570 million. Tishman tried to negotiate with lenders but ultimately could not reach an agreement.
Tishman owns a number of properties in the DC area, some of which are not part of this portfolio, including International Square, Presidential Plaza and 1775 Pennsylvania Ave.
So far DC has remained relatively insulated from the problems of distressed commercial real estate, says Greg Leisch, CEO of Delta Associates.
The company just reported that the total value of distressed commercial real estate nationally has reached $187.4 billion, including properties
in distress, foreclosure and lender REO. The numbers, which have been compiled from Real Capital Analytics, represent an increase of 10%, or $17.3 billion, since Deltas January report and 33%, or $46.9 billion, since November 2009. One of the reasons DC distress has remained low is that a significant portion of the areas distressed assets-37%-is largely concentrated in four companies: General Growth Properties, Opus, Tishman Speyer and Broadway Management.
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