Mr. Lawlor explained to The New York Times in August 2006 that once a building’s income has gone up, Broadway’s job is done. “We have a very strict discipline we try to bring to bear about sales,” he said.
“The velocity with which properties were changing hands, even at the time, I think, was a red flag for the market,” said Matthew Anderson, co-founder of Foresight Analytics.
That velocity, however, was Broadway’s guiding principle.
Industry experts nonetheless emphasized that bond-holders and lenders like Lehman are as much to blame as Broadway and real estate investors who acted the same way. “As far as I’m concerned, the lenders are the bigger, if not the biggest, culprits in the whole situation because they’ve allowed this mess to be created,” said Mr. Mermelstein, the attorney. “Who gives you money on blind faith? And we’re talking about billions of dollars,” Mr. Fasulo said. “It’s hard to find someone without blood on their hands.”
WILL BROADWAY PARTNERS SURVIVE? Perhaps. Industry experts emphasized that lenders have been lenient with loans so far. Mr. Fasulo said that lenders will continue to extend due dates; Mr. Mermelstein even predicted that lenders will discount the value of these loans, adding that they will have to acknowledge that “most of the loans on the books for commercial properties are either in default or going into default.”
“Realistically, most of these notes are worth 50 percent if not more than 50 percent off what the note is,” Mr. Mermelstein said. “So, if the lender doesn’t discount the note, all of a sudden they’re going to have to foreclose on millions and millions of square feet of property, and that’s not going to happen.”
Mr. Fasulo explained that lenders don’t see the use in taking back that much real estate. “As opposed to rushing to foreclosure,” he said, “many lenders have realized that, ‘If I take this asset back, what am I going to do with it? At least I have a skilled operator on the ground who can manage it.’”
Harry Macklowe gambled and lost—before the market crashed. This time, since both lenders and investors have plunged together into the abyss, Broadway Partners may have their chance to convince lenders of the need to scrape their way out of the abyss together.
Lehman bought that argument. The only question is whether stronger lenders will.