Letters to the Editor

Real Estate Realities

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Steven Seidenberg’s “The Pain Spreads,” January, is an ex­cellent statement of the problemsconfronting the refinancing of commercial real estate loans.

Seidenberg states that bankruptcy is an option. It is questionable how viable an option a voluntary bankruptcy is for many loans because of the “bad boy” carve-out liability in many loans, which subjects guarantors to personal liability for the debt if there is a voluntary bankruptcy.

I would also like to point out a segment of the commercial real estate marketplace that Seidenberg did not discuss. That segment is the tenant-in-common syn­dication arena. There are very few, if any, lenders willing to refinance loans owned by tenants in common, and that is going to have severely adverse tax consequences for investors who may have to “roll up” their interests into a limited liability company to obtain refinancing.

David F. Belkowitz
Richmond, Va.

Your article’s premise is that many commercial real estate owners have done nothing wrong, yet they can’t get refinanced. Yeah, right; where do I line up to buy this swampland?

I am sure there are many owners holding overvalued commercial real estate that will not get refinancing; and no lender in his/her right mind would give it to them. They paid too much for the stream of income. Many weren’t investing at all; many were betting on the next faulty overvalued appraisal. People shouldn’t say they are investing when in fact they are gambling.

What should the first clue have been? When no one person wants to hold the paper long-term it becomes a game similar to musical chairs. It’s tough luck for the gamblers who lost and now have no chair in which to sit. I guess they are out of the game.

What created this mess? Unrea­son­­ably low cap rates were being utilized because of risk analysis em­­ployed by people who have never owned commercial real estate and didn’t know what they were doing. Second, assumptions were made based on the artificially low lending rates, hoping, praying, betting (and now begging) they would continue indefinitely. The investment wasn’t being made based on the underlying real estate so much as the terms of the loan. They weren’t buying real estate; they were investing with someone else’s money on loan terms. That’s their problem, not ours.

It was a huge game of chance engineered by lenders. Everyone knew this was coming, as evidenced by the lenders’ unwillingness to hold the paper. They knew the appraisals were faulty. They appreciated the fragility of the liar’s loans. That’s why they securitized the loans—to hide the crappy paperwork that was supposed to form the basis of making the loan.

No underwriting equals no brains and no investment value. This whole house of cards came crashing down, and just saying “They have done nothing wrong” isn’t going to cut it.

They did do something wrong.

They paid too much for the income stream that was contrived by greedy borrowers, lenders and those controlling the capital markets. The smart ones signed nonrecourse paper, leaving the bankers and other suckers who bought the “investments” to deal with the real values. Tsk-tsk!

This isn’t strange or new territory as stated in your article. The best I can say is it’s just tough luck for your clients. And if borrowers are scared, they have every reason to be: Gambling in commercial real estate can get you burned. Welcome to the next campfire. Please bring your own marshmallows.

Steve Lombardi
West Des Moines, Iowa


ABA President Carolyn B. Lamm’s “Staying on Message,” January, saying that lawyers should ensure that ethics, professionalism and client protection remain “paramount,” would have a good bit more credibility if the ABA did not cop out to pragmatism simply to enhance “the employment prospects of those whose careers are affected by the recession.”

Indeed, Eileen Libby’s piece in the same issue, “Conflicts Check, Please,” underscores how facile the ABA can be with “ethics” in order to accommodate the lawyer who is looking for a job. Eliminating disclosure to potentially affected clients and abrogating the need for client consent (the Rule 1.10 miscue) sure puts a lie to those old-fashioned notions of “client loyalty” and the sanctity of “client confidences.”

There is at least hope that Jamie Gorelick’s effort as co-chair of the ABA Commission on Ethics 20/20 will not be inhibited by the unique ethical notion that “what’s good for the lawyer shall be good for the client.”

Robert P. Cummins


Jim McElhaney’s articles are very useful. as a certified court interpreter, I found his January article, “The Power of Plain Talk,” particularly useful.

McElhaney has written several excellent recommendations par­ticularly for attorneys who speak through an interpreter for defendants or jurors who do not understand English. His recommendations facilitate the interpretation into the target language, for example, Spanish.

A. Samuel Adelo
Santa Fe, N.M.


Your January Opening Statements article “Good Rx for Employers,” is incorrect when identifying the state of New York as the only employer to try mandating vaccinations as part of the H1N1 pandemic.

In the health care field there are very strong reasons to consider mandating vaccinations and there are significant employers who have chosen to do so. While any employer has to weigh the costs and benefits of any mandate, protecting patients weighs especially heavily for hospitals.

There are legal issues to consider, but many of those are instructive as to how an employer should consider or implement the vaccinations, instead of causing the employer to reject the possibility out of hand.

Kathy Dudley Helms
Columbia, S.C.

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