The Daily Parker

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"Braaaaains! Caaaaaaptial!"

One of Chicago's largest real-estate companies has defaulted on $1.72 bn in loans:

The portfolio, which also includes 161 N. Clark St., 30 N. LaSalle St. and 1 N. Franklin St., already illustrates several recent real estate trends, such as rapidly falling property values after prices peaked thanks to large amounts of cheap debt. With credit now virtually gone, defaults on downtown buildings are likely to rise, forcing them into foreclosure or onto the market at big discounts that will put more downward pressure on prices in a spiral similar to the struggles of residential real estate across the country.

"Virtually all the assets bought between '05 and '07 cannot be refinanced today without a significant capital infusion," says Shawn Mobley, executive vice-president at real estate firm Grubb & Ellis Co. "These buildings need to be recapitalized to get back in the business of being active real estate."

Without a financial restructuring, the properties are likely to join a new trend — "zombie buildings," which can't compete for new tenants because they lack the money to cover brokers' commissions and interior office reconstruction.

My friend Gina has some things to say about using economics to figure out one's personal life, with heavy emphasis on seeing decreasing marginal utility as a leading indicator. More on that later. Right now, though, Chicago commercial real estate has some serious problems, but still not nearly as threatening as New York or Orange County, California. Right now.

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