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| Tuesday, February 9, 2010 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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November 12, 2008 8:39 AM ET
(Crain’s Chicago Business)—Donald J. Trump has gone to court to buy more time to pay off a $640-million construction loan on his 92-story downtown Chicago high-rise. The flamboyant New York developer alleges that a lending group led by a unit of Deutsche Bank A.G. has wrongfully refused to extend the maturity date of the loan, which came due Friday, according to a lawsuit filed this week in a Queens County, N.Y., trial court. The complaint provides new details on the financial troubles imperiling the Trump International Hotel & Tower, the largest skyscraper built in Chicago in more than three decades. Sales of the unfinished tower’s condominium and hotel units have been stuck in roughly the same place for more than two years as the condo market has fallen into a deep slump and the credit markets have frozen up. So far, the developer has sold condo and hotel units valued at $204.1 million, with another $353.1 million in purchase contracts yet to close, according to the complaint. Mr. Trump didn’t have the money to pay off the construction loan by its original May 7 maturity date, but the lenders granted the developer a six-month extension, according to the documents. So far, however, they have been unwilling to extend the due date a second time, unless Mr. Trump agrees to unspecified “financial concessions.” Mr. Trump has asked a judge to uphold a force majeure clause in the loan agreement, which permits an extension due to an extraordinary event — in this case, the global financial crisis, according to the complaint. A Deutsche Bank spokesman declined to comment, and Mr. Trump was unavailable. Launched in 2005, the Chicago tower will cost nearly $847 million. In addition to the $640-million senior loan, New York-based Fortress Credit Corp. provided a $130-million mezzanine loan, and Mr. Trump initially contributed $64 million, putting another $12.8 million during construction, the complaint said. Deutsche Bank divided up its loan and parceled out pieces to a group of 18 lenders. Some of the participating lenders refuse to extend the loan or put any more money into the project, according to the complaint. “Many are virtually out of business or functionally insolvent and, therefore, no longer have the money to lend towards satisfying their commitment to the project,” according to the complaint. “They are seeking to renege on their obligations by imposing requirements on (Mr. Trump) that are unconscionable and unrealistic.” The document doesn’t say what the requirements are. Late this summer, Mr. Trump hired a brokerage firm to market the building's four-level retail space overlooking the Chicago River, which is set to open next year with room for 20 shops and restaurants. Observers said at the time the marketing effort was probably an attempt to raise cash to pay down debt. Mr. Trump said he was exploring a sale in response to interest from potential buyers, downplaying the chances of a sale. One of the developer’s biggest problems is that the project’s hotel units are overpriced. In the suit, Mr. Trump said he wants to cut prices below a minimum amount specified in his loan agreement, but his lenders won’t let him. Unlike a traditional hotel, where one large investor owns the entire building, the Trump project is a condo-hotel, where its 339 units are sold individually to investors. The investors can occupy their condos and have them rented out when they're away. But a slew of investors have put their units back on the market, undercutting prices on the development’s remaining unsold condo-hotel units by 30% in some cases. For instance, an investor-owned unit on the 18th floor is currently listed for $799,900, vs. $975,000 for a comparable unit. The competition is making it hard for Mr. Trump to sell out the hotel. Buyers had either purchased or signed contracts for 180, or 53%, of the hotel units by the end of July, according to a court document. By not signing off on price cuts, the lenders “have effectively prevented (Mr. Trump) from making any additional sales of hotel units, even though, had defendants consented to the sales of unsold hotel units at current market values, such lower prices would not have impaired the ability” of the lenders to get paid back in full, according to the complaint. To raise money to help pay off the Deutsche Bank loan, Mr. Trump has offered to pay $96.6 million out of his own pocket to buy all of the project’s 159 unsold hotel units and commercial space. But the developer and bank can’t agree on a price, according to the complaint. “Deutsche Bank, in an attempt to strip (the developer) of the project and line its own pockets, has taken every opportunity to frustrate Trump’s consummating the transaction,” the complaint said.
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