Hedgie beats GIC in court case

Paulson & Co, the US hedge fund, has won a US court victory against GIC over control of a group of luxury hotels that brings it closer to making potential windfall profits.

GIC has been trying to win control of the hotels from a group led by Paulson & Co since early this year. These hotels were originally part of the holdings of troubled Morgan Stanley real estate funds –

The FT reports, In a little noticed judgment at the end of June, the court extended for another four months the Paulson group’s exclusive rights to file a bankruptcy plan.

GIC had argued that the Paulson group would manipulate the bankruptcy process for its own gain. According to court documents, GIC said the Paulson group was delaying resolution to enable it to “bet on a significant upswing in the commercial real estate market”.

Note SWFs are reluctant to court the publicity that goes with litigation.

Note this hedgie made billions buying BoA when Temask was selling its “30-yr” investment.

GIC NY Loss: US$100m more?

According to a NYT article, GIC may have invested US$100m more than our MSM reported.

“The Government of Singapore Investment Corporation, which made a $575 million secondary loan, and invested as much as $200 million in equity [note  ST etc report this as US$100m: 100% less], stands to lose all of that.”

But to be fair to GIC, in the immortal words of the character Chuck (played by Steve McQueen) in the Magnificent 7, “It seemed a good idea at the time”, when the seven cowboys realised they were up against an army of Mexican bandits.

“At the time, it looked like a sound investment,” said Clark McKinley, a spokesman for Calpers, the giant California public employees’ pension fund, which bought a $500 million stake in the property. “When the market tanked, we got caught.”

‘”Many of the other companies, banks, countries and pension funds — including the government of Singapore, the Church of England, the Manhattan real estate concern SL Green, and Fortress Investment Groups — that invested billions of dollars in the 2006 deal stand to lose their entire stake.”

‘This month, several of the secondary lenders sent letters to Tishman Speyer and BlackRock threatening foreclosure because of the default. The partners tried unsuccessfully to craft a new deal that would have involved them putting up “several hundred million dollars,” in return for restructuring the loans, according to one real estate executive briefed on the negotiations.”

Note GIC is one of the secondary lenders but it is not yet known if it was one the u/m poker players.

“The secondary lenders, he said, had “overplayed their hand” in the hope that they would get back some of their investment. Instead of being forced into bankruptcy, Tishman Speyer and BlackRock will walk away sometime after a new manager is in place.

‘This month, several of the secondary lenders sent letters to Tishman Speyer and BlackRock threatening foreclosure because of the default. The partners tried unsuccessfully to craft a new deal that would have involved them putting up “several hundred million dollars,” in return for restructuring the loans, according to one real estate executive briefed on the negotiations.”

Full article. Click graphic to see where exactly GIC put its $.

GIC’s US$675m loss juz be the beginning?

What should concern S’poreans more than GIC’s US$675m loss from “its investment in Manhattan’s largest residential enclave” is that GIC is a big investor in US property, spending billions of dollars over the years (sorry can’t insert links on examples: they all break) though to be fair to it in 2006 it said it was diversifying into Brazil, India and China.

“Anybody who bought property in the last six years has their equity pretty well washed out,” said Ray Torto, chief economist at CB Richard Ellis, a real estate firm. “People are looking back on that period as the peak of the madness, the bubble. The expectation was that there was always someone who would pay a higher price after you,” part of  an article about the promoter of the investment that lost GIC about US$675 million.

“Instead of rents and values rising unchecked, the value of commercial office buildings in the United States has dropped 43 percent, on average, since November 2007, according to economists’ estimates. If unemployment continues to rise, an ugly situation could turn nightmarish,” it continues.

As to the promoter,

“Tishman Speyer, which has no corporate debt, earns fees for developing and operating the buildings but usually puts little of its own money into a deal … In the $5.4 billion Stuyvesant Town deal, for instance, BlackRock and Tishman Speyer invested only $112 million each of their own money, which they have written off … Tishman Speyer took $18 million a year in fees; company executives say they began waiving the fees in fall 2008.”

Update 25/1/10

Complex Is Turned Over to Creditors

Question is whether GIC is one of the creditors? Trying to find out.

Update 26/1/10

It is confirmed that it is likely not to get anything back.