Maiden Lane

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Maiden Lane real estate holdings default

The "CRE-fail" news of the day comes from Chicago where Crains reports that Tishman Speyer has just defaulted on a major mezzanine loan, part of a $1.4 billion package of loans, in which the Federal Reserve is the the main lender via its Maiden Lane I program. Tishman-Speyer, whose 11 Chicago CRE holdings can be seen here, has allegedly defaulted on a mezz loan supporting 6 major commercial properties.

The properties, 5.7 million sq. feet in total, represent roughly half of the CRE company's 12.2 million sq. feet of Chicago real estate. And while Tishman has enough of a real estate empire that this won't make a huge impact in the near term, what is notable about the portfolio is that the Fed itself is the holder of the mortgages, which it acquired as part of the Bear Stearns bailout and currently are part of the $26.4 billion in Maiden Lane I Assets. Even as this portfolio has been impaired by over $3.5 billion since inception, we fully expect the fully transparent Fed to have a public announcement as to just how much more value in ML 1 will be lost as a result of this default.

More from Crains:

A venture led by New York-based Tishman Speyer Properties has defaulted on part of a package of loans used to finance the $1.72-billion purchase of six prime office towers in Chicago's Loop during the frenzied real estate market of 2007, sources familiar with the deal say.

The developer bought the 5.7-million-square-foot portfolio from Blackstone Group, which flipped them as part of the New York private-equity firm's $39-billion leveraged buyout earlier that year of Chicago-based Sam Zell's Equity Office Properties Trust.

The buildings, including such Loop landmarks as the Civic Opera Building and the 10 & 30 S. Wacker Drive complex, have lost much of their value amid the broad decline in the commercial real estate market.

Maiden Lane shows "paper profits"

Government securities acquired from Bear Stearns and American International Group (AIG) are showing a ‘paper profit’ for the first time, the Federal Reserve (Fed) has claimed.

According to the Fed, the value of the holdings belonging to all three investment vehicles set up to contain the assets has increased.

The figures, which were revealed in the Fed’s quarterly statement, went up by an estimated $2 billion to over $69 billion.

Investments in Bear Stearns increased to $29.4 billion while the holdings in the two companies set up to contain assets owned by AIG rose to over $39 billion.

Maiden Lane I, a company which is jointly run by the Fed and JPMorgan Chase, is responsible for the management of the assets owned by Bear Stearns while Maiden II and III are looking after assets belonging to AIG.

Meanwhile, new figures from the US government showed that economic growth in the US slowed to 2.4 per cent during the second quarter of the year.

The figure fell from a revised rate of 3.7 per cent seen across the first three months of 2010.

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