Joel R. Glucksman
September 21, 2012
Lehman Brothers is still on the hook for billions of dollars owed to creditors after its well-publicized bankruptcy filing in September 2008. While it has already repaid roughly $22 billion to creditors, the failed investment firm is using its sizable real estate assets in a patient repayment strategy.
Nearly 25 percent of the group’s $40.5 billion portfolio is made up of a variety of real estate holdings, which altogether total $10 billion. These include prominent office buildings in Manhattan, luxury apartments in Colorado, condominiums in Miami and Hawaii, ski resorts in Montana, and golf communities in Texas. The firm – which now operates as a trust following its appeal for protection under bankruptcy law
– said its real estate assets must eventually be converted into cash to pay its creditors. It plans to maintain the real estate holdings until the market improves enough to allow the assets to be sold at more lucrative prices, the New York Times reports.
Property values remain depressed due to market volatility, and Lehman hopes that by renovating and hanging on to assets until the economy makes a full recovery, they will be able to better repay creditors.
“In the early days, the opportunity funds would have gladly bought anything and everything that we were willing to sell for the right price,” Jeff Fitts, head of Lehman real estate, told the Times. “It just wouldn’t have been advantageous to us. It’s hard to explain to people the amount of restructuring and cleanup work that had to be done early on to get the properties to a state that they could be sold to non-opportunistic buyers.”
Current claims against the estate have grown to $361 billion as of March 31. Lehman is currently paying creditors roughly 18 cents on the dollar depending on their priority in the bankruptcy proceedings.