Commercial property loans in default or foreclosure in the US rose in the first quarter of this year as the recession cut occupancies and the credit crisis halted refinancing.
Delinquent loans climbed 43% in the first three months of this year to $65.9 billion, according to data from New York-based research firm Real Capital Analytics, an increase of $46 billion since the end of 2008.
A total of 3,678 US properties are now listed as in distress and commercial real estate values have fallen at least 30% since their 2007 peak and may decline another 11% this year, increasing the number of properties that may be repossessed, according to Deutsche Bank AG’s real estate unit.
Boston’s John Hancock Tower, the state’s tallest skyscraper, was sold at auction at the end of March to Normandy Real Estate Partners and Five Mile Capital Partners for $661 million, about half of the purchase price of just three years ago. Broadway Partners paid $1.3 billion for the property in 2006 and defaulted on its loan.
The Nobu Hotel & Residences in lower Manhattan is among properties on Real Capital’s troubled asset list. The planned 62 story tower, the Nobu sushi restaurant chain’s first US hotel near the New York stock exchange, was being built by property investor Kent Swig but has been halted because of a dispute over loans.
Developer Sheldon Solow’s planned East River housing and office development near the United Nations is also identified as delinquent on Real Capital’s list. Solow is said to owe $85.7 million in construction loans and letters of credit on the project, according to Citigroup.
Read David M. Levitt’s full article “Commercial Property Defaults Rise as Equity Dries Up” in Bloomberg.com (April 2, 2009).