Victory project downtown facing loan default by Hillwood?

The DMN reports that German journalists are saying foreign lenders backing the Victory Park development downtown are facing pushback from Hillwood Development (Perot’s development arm and Victory’s owner/developer) about meeting debt payments securing the Victory loans. The possible (although I suspect unlikely) result? A foreclosure on a portion of the Victory project. The report comes as virtually all of the retail development originally installed at Victory has now left the project.

According to a DMN story, Hillwood owes about $185 million on the Victory project, and the company and lenders are doing the financial dance that often preceeds a loan reworking and/or foreclosure filing. I doubt that Hillwood is going to default on the loan, because when the economy rights itself, I suspect there remains plenty of money to be made completing the site. And I also doubt that foreign lenders are eager to take over the property by forcing a foreclosure for many of the same reasons AIG has so-far been spared — some deals just seem to big to be taken down. Plus, dislodging Hillwood would force the lenders to hire another developer to lease and/or liquidate the property, and taking over a deal of this size would probably result in far more losses on the investment than simply allowing Hillwood to rework the deal.

One caveat: Hillwood probably assumes exactly the same thing and will probably attempt to drive a hard bargain with the lenders. And as we all know, not everyone walked away unharmed at the OK Corral.



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