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  4.  » More Commercial Property Owners Choosing to Default on Mortgages, Part 1

More Commercial Property Owners Choosing to Default on Mortgages, Part 1

On Behalf of | Aug 27, 2010 | Commercial Litigation |

Owning a business requires making myriad tough and strategic decisions. An article appearing recently in The Wall Street Journal reports that more and more commercial property owners are making difficult decisions regarding underwater mortgages. 

According to the WSJ, an increasing amount of commercial property owners are choosing to default, or send their keys back to lenders, known as “jingle mail.”  Most of the property owners say that they did not take the decision lightly, but made a tough choice for the long-term in order to keep their business and assets afloat and viable.

Such a decision was made earlier this year regarding a commercial property in New Jersey. According to the WSJ, luxury-mall owner Taubman Centers Inc. decided to stop making interest payments on its $135 million mortgage for the Pier Shops at Caesars in Atlantic City, New Jersey.

The property was underwater, with a considerable gap between the current value of the property and the amount of the mortgage. Chief executive Robert Taubman estimates that the property is currently worth only around $52 million, so he decided to make the pragmatic decision to default.

Earlier in August, the $2 billion Xanadu retail development project in New Jersey was handed over to a bank group by a group led by investment firms Colony Capital. The lender group said that it tried to negotiate and was disappointed a deal could not be reached.

The WSJ predicts that there will be more “jingle mail” ahead because of $1.4 trillion due for commercial property mortgage payments by 2014, 52 percent of that total is due for underwater properties.

 

Source:

Commercial Property Owners Choose to Default (The Wall Street Journal)

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