Stripnomics

Last week, Terry Pristin of the New York Times wrote a piece titled “Risky Real Estate Deals Helped Doom Lehman“. In the article, Terry states:

“In July 2007, just as the credit squeeze began, Lehman teamed up with Prologis a publicly traded logistics company, to buy a national portfolio of warehouses for $1.85 billion from Dermody Properties and the California State Teachers Retirement System. To get the deal done quickly, Lehman not only supplied the debt financing but also provided 80 percent of the equity.

But then Lehman found itself unable to pool the warehouse mortgages with other loans and sell them to investors, said Cedrik Lachance, an analyst for Green Street Advisors, a research company based in Newport Beach, Calif. Nor was it able to find buyers for its equity position.

At the same time, the warehouse industry, whose fortunes depend on a healthy retail industry, began suffering the effects of the economic downturn, “Property values started declining shortly after the deal closed,” said Mr. Lachance, who estimated that the portfolio had lost 15 percent of its worth.”

Click HERE to read the full article.

I think 15 percent is CONSERVATIVE. Still, I am just glad that the information is starting to come out. Someone else just needs to start questioning the numbers - they don’t lie.

This entry was posted on Tuesday, September 23rd, 2008 at 12:30 pm and is filed under Economics, ProLogis (PLD), Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.