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Yet Another Green Shoot ......

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House prices have become negatively correlated to commercial property prices in the last few months.

I do not see how this can continue for long. The basic ability to pay for occupancy in both markets is driven by the same economic fundamentals with leverage for many buyers in both markets creating the same risk.


Real estate investor Simon Halabi will lose control of seven London office buildings after defaulting on 1.15 billion pounds ($1.84 billion) of bonds tied to the properties, two people familiar with the situation said.

CB Richard Ellis Group Inc., the manager of the bonds, will appoint Ernst & Young LLP as receiver for the properties, said the people, who declined to be identified because the matter hasn’t been made public. The buildings include JPMorgan Chase & Co.’s offices at 60 Victoria Embankment.

The action allows the receiver to collect the rent from the buildings and preempts an order by the U.K. government to seize the properties for unpaid taxes, the people said. Companies controlled by Halabi borrowed 1.45 billion pounds against nine properties in 2006 when they were valued at 1.83 billion pounds. About 1.15 billion pounds of the debt was packaged into bonds. In June, the offices were valued at 929 million pounds, according to an estimate commissioned by former loan servicer Hatfield Philips.

Halabi, 51, didn’t return a call for comment left at Buckingham Securities Holdings, his property advisory company, which is in the process of being liquidated. Kamlesh Bathia, his spokesman, didn’t respond to an e-mail seeking comment. Philip Cropper, head of CB Richard Ellis’s corporate finance division, and Vicky Conybeer, a spokeswoman for Ernst & Young, declined to comment.

Ernst & Young isn’t authorized to sell any of the properties but may collect the rental income, the people said.

CB Richard Ellis is allowed to appoint a receiver over any of the borrower’s assets, according to the bonds’ 2006 prospectus. The buildings being put into receivership are those that owe taxes, the people said. Two other buildings backing the bonds weren’t assigned receivers.

Earlier this month, the U.K. government said Halabi’s companies owed 4.77 million pounds in taxes on the London office buildings.


In June, White Tower 2006-3 Plc, the issuer of the bonds, became the largest commercial mortgage-backed securities deal sold by a single borrower to default in the U.K. It breached debt agreements after the nine buildings lost half their value.

Syrian-born Halabi started as a director of the real-estate investment company Property Trust in the 1980s and is a billionaire, according to Forbes magazine. He was among investors who benefited from the property boom that was fueled by the growth of securitization.

Halabi’s assets include the Naval and Military Club on London’s Piccadilly and Mentmore Towers, the former home of Baron Mayer de Rothschild in Buckinghamshire, England. He was one of the original backers of the planned London skyscraper called the Shard before selling his stake last year.

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