Commercial Real Estate Blog

As of late last month, Carl Berg was quoted saying that if his deal to sell the company didn’t materialize by the end of the month, it would be taken off the table. Well, the end of October has come and gone with no word of a sale.

On Monday however, Carl Berg was quoted by the Merc as saying the deal was still going. What’s holding up the deal, if any, is not known but it is probably reasonably safe to say lining up what is likely $1B+ in commercial debt is not an easy task right now, particularly for buildings which are have a vacancy rate of over 30%.

A Bloomberg article today predicted a 15% drop in commercial real estate prices as a result of the increased costs of debt. The article cites the delayed Archstone-Smith transaction and the failed Mission West transaction as evidence that deals are beginning to fall apart. Of course this is true and a lot of money in the form of deposits has surely been lost as the markets saw a tightening of credit.

The article continues on to give an example of the repriced debt:

About six months ago, a 30-year commercial loan with 5 to 10 years of interest-only payments would have cost the borrower about 120 basis points more than the yield of the 10-year Treasury note. A similar loan would now cost about 160 to 200 basis points more than the 10-year Treasury’s yield of 4.6 percent, data compiled by New York-based Cushman & Wakefield Sonnenblick Goldman show.