Lehman has said that 57 percent of its commercial real estate assets are in the United States, with 26 percent in Europe and 17 percent in Asia. Of its real estate positions, debt represents 58 percent and equity, 26 percent. Another 16 percent is in securities. The investment bank did not respond to a request for comment.
Though Lehman may have been quick to finance deals, it did better as a loan originator than some of its competitors, said Frank Innaurato, a managing director of Realpoint, a credit rating agency in Horsham, Pa., that monitors commercial mortgage-backed securities. These are created when mortgages are packaged together and sold to investors as bonds.
Of the 2,845 loans that Lehman originated for this bond market, only 0.5 percent are currently listed as delinquent, in line with the average for all the loans backing these securities. Loans originated by Bank of America , for example, have a delinquency rate of 0.7 percent, Mr. Innaurato said. And none of Lehman’s defaulted loans poses a major credit risk, he said.
But Lehman itself continues to hold debt and equity positions that have dropped significantly in value, including several investments that were made after the market peaked.
In October 2007, Lehman joined Tishman Speyer in buying Archstone-Smith, a publicly traded company with about 360 upscale apartment buildings across the country. Lehman put in $250 million in equity and led a group of lenders that contributed $4.6 billion in bridge equity for the $22.2 billion deal, which was financed in part by Fannie Mae and Freddie Mac.
Both Lehman and Tishman Speyer have written down their investment in Archstone by 25 percent. The partners sold a majority interest in 16 apartment buildings when the deal was completed. Since then, they have sold 13 additional Archstone properties, according to Jessica Ruderman, a senior marketing analyst at Real Capital Analytics.
In June 2007, Lehman teamed up with Thomas Partners, a real estate investment trust based in Los Angeles, and the California State Teachers Retirement System in a $1.15 billion deal to buy 10 office buildings, including the new Frost Bank Tower, in Austin, Tex., that Blackstone was flipping from its Equity Office Properties acquisition. By last July, Lehman still had a $1 billion equity and debt investment in the deal, according to Commercial Mortgage Alert, a trade publication.
Lehman and its partners paid an average price of $328 a square foot for the Austin deal. In the last year, however, buyers of office buildings in Austin paid an average of just $221 a square foot, said Mr. White of Real Capital Analytics.
But an Austin broker, Jeff Coddington, a senior vice president of Oxford Commercial, an affiliate of Cushman & Wakefield, said the bulk of the portfolio bought by the Lehman consortium consisted of prime downtown office buildings. “Obviously, you pay a premium for this real estate,” he said.
In another deal that occurred at the peak of the market, Lehman and its partner, Monday Properties, bought 10 office buildings in the Rosslyn section of Arlington, Va., for $1.3 billion. Lehman managed to sell its debt financing, but it continues to own 75 percent of the equity.
Prices in Arlington have declined by about 12 percent, Ms. Ruderman said. “Compared to the rest of the market, that’s not so bad,” she said.