If so, then a property crisis that began unlike any other - precipitated by a once-in-a-century pandemic - may also have a unique aftermath. Meyer and other real estate investors are now debating whether the great reckoning that many foresaw is still just another quarter away - or perhaps may not come at all. "If there's a good probability that the property recovers then lenders will try to work with borrowers." "For now, as a lender, it's really on a deal-by-deal basis," says Billy Meyer, of Columbia Pacific Advisors, which recently launched the Columbia Recovery Fund to provide bridge financing for Covid-stricken borrowers. The distressed debt pile bulged in the second quarter last year, but has since accumulated more gradually. Two-thirds of that was accounted for by retail and hotels. Real Capital Analytics, a research firm, classified US$146 billion in commercial real estate assets as being in distress - or soon to be - by the fourth quarter last year. "That is the answer we all want to know." "What happens when it stops rolling?" he asks. The can is being kicked down the proverbial road on an unprecedented scale, according to Radow. His company, Radco, now owns thousands of apartment units across the country. But never on this scale," says Norman Radow, who made his name in distressed real estate by cleaning up Lehman Brothers' real estate portfolio after the 2008 crisis. "Maybe a single asset or borrower has gotten relief like this. Ziel Feldman, chief executive of HFZ Capital, was forced to put his penthouse up for sale for US$39m after creditors sued to foreclose on several of his faltering condominium projects.
#The supertall tower creaks breaks full#
One analyst likened the situation to a storm cloud on the horizon poised to burst at the first crack of lightning.īut a strange thing has happened since then: creditors have broadly held fast, creating a period of leniency that is approaching a full year for some borrowers, and has persisted longer than any seasoned professionals can recall. "Don't expect creditors to extend forbearance much longer," another panellist agreed. "The non-performing loans are coming!" Laurie Golub of Square Mile Capital warned in November at the annual conference hosted by New York University's Schack Institute of Real Estate, claiming that lenders had been "coddling" borrowers. The expectation in the industry was that many would call time on delinquent borrowers in the new year, touching off a great reckoning after a decade-long rally that has bequeathed plenty of questionable projects. By then, lenders had granted months of forbearance after the Covid-19 pandemic paralysed New York City last March. To many in the real estate world, that event looked like a harbinger of doom. Feldman, chief executive of HFZ Capital, one of the city's swankiest developers, was forced in December to put his own house up for sale - asking price: US$39 million ($53 million) - after creditors sued to foreclose on several of his faltering condominium projects. When the wolves came to Ziel Feldman's door, it was a triplex penthouse on the Upper East Side of Manhattan. US creditors are wary of calling in commercial real estate loans because many do not want to be saddled with undesirable assets.
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