High-Profile Loan Defaults Put Institutional Investors Under Microscope
	Troubled Assets Still Pose Risks, Especially to Small Banks
	Korean Pension Fund Targets Office and Retail Assets in London
	Annual Green Building Survey, Chance to Win Gift Card

It has been a cruel summer for several of the nation’s largest and most respected institutional investors when it comes to the commercial real estate market. A combination of rising loan defaults, deteriorating property fundamentals and the long-term prospect of higher interest rates in the wake of massive fiscal and monetary stimulus is testing their fortitude.

In August, Tishman Speyer Properties defaulted on loans associated with the acquisition of 28 Washington, D.C.-area office buildings for $2.8 billion from the Blackstone Group in 2006. Blackstone sold the portfolio to Tishman at the height of the market, the same month it purchased CarrAmerica, the portfolio’s previous owner. Tishman also owns Rockefeller Center and the Chrysler Building in New York and controls assets worth an estimated $35 billion.

Also in August, the California Public Employees’ Retirement System, or CalPERS, the nation’s largest pension fund, defaulted on a $70 million mortgage note it signed in 2007 with partner CommonWealth Partners LLC on the KOIN Center, the tallest office tower in downtown Portland, Ore.

“The Continued Risk of Troubled Assets”, the latest report from the Congressional Oversight Panel (COP), points out the ongoing risks that commercial and residential mortgage-backed securities (CMBS and RMBS, respectively), along with other illiquid troubled assets, pose for financial institutions and the financial system.

Despite being a key spark that ignited the financial crisis and the headline focus of several of the most significant government programs — such as TARP, TALF and PPIP — these troubled assets continue to weigh on both bank balance sheets and the overall health of the financial system. I believe that they present particular risks for the eventual recovery of the commercial real estate sector.

The COP report estimates that a substantial portion of real estate-backed securities and whole loans remain on bank balance sheets. While the value of these assets has been written down substantially from the high marks preceding the recession, the lack of liquidity in the market and weakening fundamentals suggest that values may still be overstated.

The National Pension Service of Korea (NPS), the world’s fifth largest pension fund, is targeting trophy office and retail assets in central London for possible acquisition. Rockspring Property Investment Managers, based in the United Kingdom, will acquire properties on behalf of the newly launched NPS Central London Property Limited Partnership. Several transactions are expected to close before the end of 2009.

Rockspring is seeking to acquire landmark assets extending from London's West End through the central city. The West End contains many of the city’s major tourist attractions, businesses and headquarters. The desired properties have long leases with strong tenants in the office and retail sectors. Typically the individual lots can be acquired with or without debt.

“We are absolutely delighted to be working alongside NPS. Winning this mandate is a reflection of our strong track record in managing funds in many and varied market conditions over the last 25 years,” says Robert Gilchrist, chief executive of Rockspring.

National Real Estate Investor is once again investigating trends in the development and use of Green Buildings. Whether you own, develop or lease green buildings or not, we would like to include your opinions as an industry professional and valued National Real Estate Investor reader. Your answers will be kept completely confidential and used only in tabulation with others. As an added incentive, at the end of the survey you will be given the opportunity to win a $100 Visa gift card.

If you’re a developer, click here.

If you’re a corporate user, click here.