Miami Real Estate Developers Impacted by Lehman Bankruptcy

Lehman Brother’s filed for the largest bankruptcy in history Monday, dwarfing WorldCom Inc.’s insolvency in 2002 and Drexel Burnham Lambert’s failure in 1990

South Florida was greatly impacted when Lehman Brothers, a lender most large real estate developers would turn to for high-end projects, filed for bankruptcy protection.

The Lehman Brothers bankruptcy has left behind billions in debt, including millions in Miami. Lehman bankrolled some of South Florida's biggest real estate projects such as Miami Beach’s Canyon Ranch resort, the Riande Hotel chain, the Donald Trump condo tower under way in Hollywood and the Related Group’s Icon Brikell on Biscayne Bay. City and county governments also invested heavily in Lehman.

"The most important thing is that we must avoid panic," said Marcos Kerbel of Florida International University.

State and local retirement funds, the hurricane catastrophe fund and funds for Medicare all have holdings in Lehman Brothers. But for a state with a massive, multibillion-dollar portfolio, experts said the exposure remains minimal.

The South Florida market is still reeling, and Lehman Brothers controls billions of dollars in real estate loans. That number includes an estimated $965 million in loans for new condos and properties in Miami-Dade County and another $900 million in Broward County.

Experts who track the South Florida condo market said it is their impression that most of the loans Lehman wrote in the past two years were using strict guidelines, meaning they will hold up.

Lehman Brother’s daily closing share prices:

• 1994- Lehman Brother is spun off by American Express in an IPO under the leadership of CEO Richard Fuld.
• 1998- Shares drop 63% after Russia’s debt default.
• 2007- Lehman Brothers is the largest underwriter of mortgage-backed securities.
• March 2008-Shares plummet after Bear Stearns collapses.
• September 2008- Fuld openly seeks a forced sale after efforts to secure a cash infusion fail. The stock drops 70% in 3 days.
• Lehman Brothers files for bankruptcy citing more than $613 billion in debt as the share price drops as low as 15 cents.

Contributed by MLR Realty