January 26th, 2010
Walking away from Stuy Town…
I find it interesting the way real estate giant Tishman-Speyer, realizing it would lose tons of money on its ridiculous Stuyvesant Town investment, decided to just walk away from the deal, turning the middle-income enclave back over to the deal’s creditors. Isn’t that exactly what a lot of middle-class homeowners are doing with their homes, only to be roundly criticized for being morally weak because they can’t live up to their obligations?
Come on! Let’s be real here. More and more middle-class families, realizing their homes are under water — meaning the amount they owe is far more than the house is currently worth — ought to borrow a page from Tishman-Speyer and just walk away. It’s a calculated, financially-sound decision. Rather than pay out thousands in interest for a worthless house, just cut your losses.
Not a banker in the country would do anything different, except they will criticize the homeowner for being weak and shiftless because they become owners of said worthless houses. Now that’s funny, given how many deals they walk away from. The banks are nervous because more and more people are realizing that the best thing to do when a loan has gone bad is to do what Tishman-Speyer did — walk away and turn the property over to the creditors.
Will Tishman-Speyer be hurt by its decision? Here’s a graph from the NY Times story:
Any collateral damage to Tishman Speyer, which manages a $33.5 billion portfolio of 72 million square feet of property in the United States, Europe, Asia and Latin America, was expected to be minimal; real estate experts said that Tishman’s reputation might suffer, but that the firm would still be able to put together deals and raise capital.
Interesting….