The Wall Street Journal-20080216-Fortress Gives Macklowe Extension- Staying a Possible Loan Foreclosure

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Fortress Gives Macklowe Extension, Staying a Possible Loan Foreclosure

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Real-estate developer Harry Macklowe announced late Friday that hedge fund Fortress Investment Group gave him an extension on $1.4 billion in debt that fell into default a week ago, an apparent temporary reprieve from possible foreclosure on the loan.

The loan, $1.2 billion plus accrued interest, was part of the $7.1 billion in short-term debt that Mr. Macklowe borrowed to purchase seven Manhattan skyscrapers from Equity Office Properties Trust a year ago. But Mr. Macklowe was unable to lure equity partners or refinance the buildings once the credit crunch hit, and he defaulted Feb. 9 on the Fortress loan plus an additional $5.8 billion in loans provided by his main lender, Deutsche Bank AG.

Mr. Macklowe's statement said that he also had reached an agreement with Deutsche Bank. But the $5.8 billion loan is still problematic because some of the debt on four of the seven buildings is held by other lenders who hold subordinate positions after Deutsche Bank's senior mortgage. Those other lenders haven't agreed to an extension, according to two people familiar with the matter, and that debt could still be foreclosed upon.

The written statement didn't specify the length of the extension. Mr. Macklowe's spokesman declined to comment and a spokeswoman for Fortress declined to comment.

Mr. Macklowe put up 12 of his properties as well as a personal guarantee of $1 billion as collateral on the Fortress loan. His statement was released shortly after bids were due on Mr. Macklowe's trophy General Motors building in Manhattan, one of the buildings Mr. Macklowe used as collateral on the Fortress loan. A person familiar with the matter said that multiple bids came in for that property, but declined to say what the prices were.