Lehman Brothers is aiming to spin off its commercial property assets into a new company following sharp writedowns in their value.
‘The concentration of positions in commercial real estate-related assets has become a significant concern for investors and creditors,’ Lehman said.
‘Therefore, Lehman Brothers believes that it is in the best interests of all its constituents to separate these assets from the rest of the firm.’
Real Estate Investments Global will include around $25bn (£14.2bn) - $30bn (£17bn) of Lehman’s current property assets, which include equity investments in private equity buyouts of company’s such as US residential apartment REIT Archstone-Smith and Californian residential developer SunCal.
It will also include the debt used to finance these and other property deals undertaken by itself and third parties.
It said that doing this would allow it to value its property assets on the basis that they will be held to maturity, rather than marked to the market value on a quarterly basis.
It said that this would maximise value for shareholders, reduce volatility, and would mean it would not have to sell assets at distressed prices.
This follows a writedown in the value of mark-to-market commercial property positions of $1.7bn (£967m) in the company’s third quarter results revealed today.
Lehman said that during the period it had also reduced its commercial property exposure by 18% from $39.8bn (£22.6bn) to $32.6bn (£18.6bn).
Lehman brought forward its results by a week after its shares plunged 45% on Tuesday due to concerns over its liquidity and ability to carry on trading.
It had been in talks with Korea Development Bank regarding the possibility of fresh equity investment, but these talks have now ceased.
UK resi sales
Overall, made a net loss of $3.9bn (£2.2bn), due to net mark-to-market writedowns of $5.6bn (£3.2bn).
As well as the spin off, Lehman said it was in talks to sell $4bn (£2.3bn) of UK residential mortgages, which it had acquired through the acquisition of UK mortgage lenders, to BlackRock.
It said that this sale would contribute to it reducing its residential mortgage exposure by 31% to $17.2bn (£9.8bn).