malach hamovess

Judge Strikes a Blow to SPE Game

the misleading nature of this article derives from a lack of understanding of the initial transactions; there was no SPE used to keep assets off of the balance sheet. the sole purpose of the SPE was to supposedly protect a lender on a specific property isolated in the SPE from being subject to the jurisdiction of the bankruptcy courts were the parent to file.

however, the court has upset that scheme which was not presented to screw the public or mislead anyone; rather it was presented to facilitate a more natural loan on the property which could be made without regard to the creditworthiness of the parent company, GGP

this practice had been challenged in other bankruptcy proceedings; but it wasn't until the GGP case, by far the largest real estate failure of the current meltdown, that a major decision effectively challenged the entire system

lenders had been deluding themselves into thinking that they could insulate their loans from the overall liquidity issues of a multi-property reit. they were just given a very rude wake up call which will reverberate throughout real estate finance for years to come