Commercial real estate investors may benefit from AIG delays and cuts on commercial development deals. Savvy investors may find deals for pennies on the dollar.
Commercial Real Estate Investors should consider looking into deals that were funded by American International Group Inc. (“AIG”) to explore the possibility of picking up prime commercial real estate at deep discounts.
Everyone is familiar with the $160 million bonus scandal that began when AIG, who has received more than $173 dollars in government mortgage meltdown bailout assistance, decided to pay huge bonuses to its personnel despite public outrage citing contract obligations.
“What many people don’t know is that recent lawsuits claim that AIG has is not performing on several of its commercial real-estate projects, which could leave many of its shopping center and apartment JV partners without the money they need to pay lenders and make necessary repairs,” says Jayme Kahla, a Texas Commercial Real Estate Training expert and private equity fund manager. (http://realestateinvestorcoaching.com/membership/)
According to a Wall Street Journal article, affiliates of one real-estate firm, which teamed with AIG in a $2 billion purchase of a low-income apartment portfolio in 2007, have sued AIG for missed and delayed payments.
They claim that they were told by AIG’s top real-estate executive that “the current Federal Reserve funding arrangement with AIG does not provide for funding of AIG Global’s commitments to its joint venture partners.”
The Journal article continued to say that people familiar with the situation said that AIG also reneged on making payments to a partnership with an Alabama shopping-center developer, leaving the developer’s bank lenders with potential losses.
In fact, approximately 15 banks could end up with non-performing loans at a time when commercial-property losses already are increasing. AIG has said that it is in compliance with applicable obligations.
AIG Global Real Estate currently has interests totaling more than $23 billion, across 53 million square feet of real estate. In the past, AIG Global Real Estate acquired portfolios and then funded them to cover remodels, repairs and operating expense shortfalls.
Now that AIG may be having trouble meeting its obligations on certain deals, there may be an opportunity for commercial real estate investors to arrange private money to purchase some of those projects at deep discounts.
One thing is for certain. It makes sense to keep an eye on the possibility of opportunities for deeply discounted deals as AIG continues to analyze its commitments and obligations both to its commercial real estate partners and to the government as a result of the bailout funds it has received.
We are planning on including more about this in our next Las Vegas real estate investor training workshop.
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