The great gains in commercial real estate over the past few years are coming to a close if the sale of 6.9 million square feet in Silicon Valley are an indicator. The deal to sell Mission West, the properties owned by Silicon Valley mogul Carl Berg, fell through when the buyer, speculated to be Starwood Capital Group, were unable to get financing for the deal.

If there is no capital flowing to make these deals go through, others are going to be backing out of constructing large commercial projects in the future. The flow that real estate needs to be successful will dry up quickly leaving another hole in the real estate market.

“We’ll only sell if we can get a fair price for our company,” said Berg, known as one of the Silicon Valley godfathers who built the buildings that house such high-tech companies as Apple and Microsoft. “We continue to lease property, and we believe there is no question we’ll show an increase in earnings and dividends this year.”
Nervous lenders Mission West shares closed at $12 Friday, down from the $13.55 a share when the buyer initially agreed to take the portfolio in July. While Berg said steps taken Friday by the Federal Reserve to inject $38 billion into the banking system helped calm the markets, it may not be enough to stop more lending problems.
“It will take time to play out,” he said. “Nobody knows how bad it can get.”
Berg said he watched the situation unfold over the past 10 days as the buyer’s lender went from “nothing would keep him from making the loan” to “we’re pulling out of the market.” via San Jose Mercury News

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