WASHINGTON, DC-Brookfield Properties is launching foreclosureproceedings on Tishman Speyer’s office portfolio in the DC area,according to a report in the Wall Street Journal over the weekend.According to the news report, Tishman is pushing back, with plans torestructure its $570 million in debt for the 20-building localportfolio. Tishman could not be reached over the weekend for commentby GlobeSt.com. A Tishman spokesperson told the Journal that the company is confident it can implement a restructuring to maintain its ownership.

Tishman Speyer has not settled on an exact strategy as to how it will do this, a source tells GlobeSt.com. However it is going to happen within the next two months. The company issued a general statement that accussed Brookfield of trying to pressure its ownership group by starting the foreclosure proceedings. “The portfolio has terrific assets and we are not surprised Brookfield wants them,” the statement noted. “That said, we have the funds needed to restructure the portfolio debt and we’re confident that we canimplement a restructuring that will maintain our partnership’s ownership.”

In February, Brookfield Properties acquired the debt associated withTishman Speyer’s DC portfolio. Brookfield was reported tohave bought the debt in a loan-to-own structure that would give thecompany significant leverage in the restructuring process, possiblyallowing it to buy assets if they are auctioned off in a bankruptcy.

Last summer, Tishman defaulted on the 6.3-million-square-foot, 28-assetCarrAmerica portfolio, which it holds in a partnership, afteracquiring it in 2006 for $2.6 billion. The partnership violatedcovenants on $200 million in its revolving credit line. The jointventure term loan and revolver debt totals approximately $570 million.Tishman tried to negotiate with lenders but ultimately they could notreach an agreement. Tishman Speyer owns a number of properties in the DC area, some ofwhich are not part of this portfolio, including International Square,Presidential Plaza and 1775 Pennsylvania Ave.

So far DC has remained relatively insulated from the problems ofdistressed commercial real estate, Greg Leisch, CEO of DeltaAssociates told GlobeSt.com in an earlier interview. The company justreported that the total value of distressed commercial real estatenationally has reached $187.4 billion, including properties indistress, foreclosure and lender REO. The numbers, which have beencompiled from Real Capital Analytics, represent an increase of 10%, or$17.3 billion, since Delta’s January report and 33%, or $46.9 billion,since November 2009.

One of the reasons why DC distress has remained low is that asignificant portion of area’s distressed assets–37%–is largelyconcentrated in four companies: General Growth Properties, Opus,Tishman Speyer and Broadway Management.

There is ample anecdotal evidence, though, that the economy and debtmarket crisis has worn down local building valuations, making itdifficult to refinance, or worn down developers’ own balance sheets.For instance, Fitch Ratings just reported that Foulger-Pratt’sBlackwell I in Rockville, MD is being transferred to specialservicing because it is in imminent risk of default. The balance ofthe loan is $33 million. Also, Fitch reported that the Tag portfolio,with office assets in Dulles, VA and Downers Grove, IL, transferredinto special servicing for the same reason, with a loan balanceof $53 million.

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