The Dirt Lawyer's Blog Archive

So, maybe the retail sale is a backup plan. Or maybe it is a potential condition of a loan extension. Who knows? What we do know, according to Crain's , is that The Donald has asked for a loan extension . And I expect he'll get it. We all know where the condo market is and right now things are not pretty. Often there are conditions on a loan extension such as a change in the debt service coverage ratio, different interest, selling chunks of the project, more equity...you name it. But this is a high profile project and I'd be stunned to see the banks say no. Whether there will be some heavy negotiating remains to be seen. Have fun, all you lawyers! P.S. Donald Jr. says the hotel's doing great; and, by the way, if you buy there it means you get Rex Grossman for a neighbor (nothing personal, Rex, but no thanks).

Just when you think a deal's going to close, another snag hits. This happens all the time. I know a deal that was supposed to close in June that is just going at turtle speed when it shouldn't be. Case in point: Waterview Tower. Last month I mentioned that Teng & Associates had apparently plunked down ~$170 million in cash on the future Shangri-La Hotel and condos, but that they were confident they'd get a loan in place soon. Enter the snag . In this case, the lender's usual carrier for trade credit insurance decides that something (either the market, or perhaps something else) makes this deal too risky to underwrite. So, it's off to Lloyd's and elsewhere to find a company willing to do the deal -- for the right price. Let's recap. Now you are looking at a huge project at a standstill, probably no policy (or closing) in place until October, the possibility of bringing in a JV partner (which could slow things down again or speed them up if there...

Thanks to Deal Junkie for pointing this out. The Journal had a story the other day that compares condotels to dotcoms that crashed a few years back. I took a pass a year ago on the concept. And that was not the first time either. I remember look at condotels at a resort in Scottsdale back in 2001 and again in Florida in 2005. Why did I look? A friend was doing well with one in Orlando but that was back in the earliest of days. Something just did not seem right about the whole thing. Finally, a savvy real estate agent told be to be very careful about this, to the detriment of her commission(!) And my spider sense may have been right this time. These are great for developers because they get the money up front which allowed them to get construction financing. Great mitigation of risk. And the management company still keeps roughly half the revenue as a management fee, so they make out all right too. The losers? You guessed it. All the risk of a down market is shifted on t...

I say the latter. Why? You had to expect that over-levered and too-optimistic deals were going to tank. Yes, the credit crunch is hitting commercial properties, especially when you want to do a high LTV deal. I'm not so sure whether that means it is a crunch or just plain sanity. Take today's Journal article on high-profile defaults and the Macklowe saga for refinancing. What is the leverage on the Eichner project, which is a casino/condotel in Vegas? (Gee, think we have a few of those around?) And how highly levered is Harry Macklowe again? These guys have made fortunes, as the article says, "living on the edge." Not everyone is that edgy, so to speak. So I'm not going to be a lemming, even if, as Moody's predicts, "the corporate default rate for the construction and building industry could reach 12% this year and...6%...in the hotel, gaming and leisure industries." Why? The opportunistic investors are waiting, ready to pounce. One told ...

Yesterday the Tribune had a lengthy story titled "Towering Troubles?" about the Trump International Hotel & Tower going up at the former site of its competitor . It asks pointedly whether people are going to show up when The Donald gets his certificate of occupancy for the hotel floors, triggering the first round of closings for the condotel portion of the project. The story goes on to talk about throwing more equity into deals to keep lenders happy as well as the state of this high-end market in general, including the fact that two major projects are stalled for financing reasons. But they are not this far into the sky. Here's the reality, or at least my take on it. I've come out publicly to say I am no fan of Trump's tactics, especially related to dumping the friends and family buyers. (He might have another side of the story, I understand, but this is just what I read.) And even though The Trump Organization hires small firms like mine, I don...

I wrote previously about Hotel 71, the East Wacker Drive property that has been struggling as of late. Well, we're not done yet. Crain's reports today that the Hotel 71 UCC auction of the mezzanine loan took place as scheduled on October 3, and that Oaktree Capital Management now controls the hotel. (Apparently two other bidders showed up but OCM, the mezz lender, prevailed.) So, according to the story it looks like OCM will try to take advantage of hotel values and put the property on the market. But (1) there's construction to be done (I checked out the Recorder of Deeds website to look at people who have and may not have been paid), (2) as we all know borrowing costs are higher, and (3) Wells Fargo, as the trustee for the participating lenders, has foreclosed on a $101 million senior loan that was due back in April. The article even hints of a Chapter 11 filing that would stall the foreclosure, deal with bills help clear the way to a sale. My bet is still on the...

Back in April, Crain's reported that Peebles Corp. was hot to buy 300 N. Michigan Avenue and convert it into a condotel with luxury condo units and the like, notwithstanding a glut of other people already doing it. Well, it looks like Peebles is joining the conventional wisdom and (wisely, in my opinion) backing out of the deal . The current market needs a little time to absorb the product that is online or in the pipeline, and this could take a while (though I think winning the 2016 Olympics may speed that up a little).