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Lehman to Sell $14B in Commercial Real Estate

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Lehman Brothers is shopping a major portfolio of commercial real estate in a bid to raise cash. The Bloomberg report doesn't say what type of commercial property Lehman is looking to move. However, it does say that overall Lehman is looking to move $14 billion out of its $40 billion portfolio. That includes $10 billion of property and about $30 billion in commercial real estate mortgages. It also mentions Blackrock as a potential buyer.

This could be the beginning of a trend. The last thing institutions like Lehman need to be worrying about right now is owning and managing real estate. This could create major buying opportunities for well-capitalized entities, especially if the commercial real estate in question needs some real expertise to get it fully leased up. Banks may end up owning more real estate than they want as well if the number of foreclosures goes up. Overall, in the next couple of years I think we may be hearing more news like this with banks looking to sell their portfolios to real estate investors.

"BlackRock is a logical buyer,'' said Jeffery Harte, a Chicago-based analyst at Sandler O'Neill & Partners LP. "They have experience in managing portfolios of assets like these. They also have experience leading groups of investors.''

Bove expects Lehman to sell its entire $29.4 billion commercial mortgage portfolio. The firm also owns $10.4 billion of property. It may record a loss of $4.9 billion on the sale of the commercial mortgages, Sanford C. Bernstein & Co. analyst Brad Hintz estimated in a report last week.

Last year, as the market collapsed, Lehman underwrote more mortgage-backed securities than any other firm, accumulating an $85 billion portfolio, 44 percent more than Morgan Stanley's and almost four times the $22.5 billion of shareholder equity Lehman had as a buffer against losses.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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