Credit turmoil halts some projects
The upheaval in credit markets has cut off the flow of funds to some developers, and a few contractors have stopped work on jobs, according to scattered reports. “In the short term, businesses in partnership with Lehman Brothers Holdings and American International Group, which had over $50 billion invested in commercial real estate around the country, had their deals threatened,” the Associated Press reported on Thursday. “Lehman and AIG were investors in many large real-estate deals.” On Wednesday, AP reported, “Already stalled in its plan for a $2 billion mega-casino in Atlantic City, Las Vegas-based Pinnacle Entertainment said Tuesday it was ending its bid to run a [$624 million casino resort and 500-room hotel in Wyandotte County Kansas], citing ‘the current turmoil in the financial markets.’” The turmoil may affect construction through two mechanisms. One is a resumption—or further tightening—of commercial loans to developers and of tax receipts to state and local governments. The second is a change in demand for different types of projects, such as offices and retail, as jobs and consumer spending either get back on track or drop further, according to a Sept. 22 Data DIGest report.