When large South Florida developers needed money, they often turned to Lehman Brothers.
That role ended in dramatic fashion when Lehman filed for bankruptcy protection. But Lehman still controls nearly $2 billion in large loans throughout the region, meaning the bank's demise will play out across South Florida's besieged real estate market.

Among the local projects Lehman backed: Miami Beach's new Canyon Ranch resort; Ian Schrager's investment in the Riande hotel chain; the Donald Trump condo tower under way in Hollywood; a recent expansion at the Aventura Mall; and the Related Group's Icon Brickell on Biscayne Bay.

LOCAL INDUSTRY

Within the local real estate industry, executives and analysts predicted a minor effect on Lehman's local holdings, since another lender would likely buy the loans at a discounted price designed to make money even in a depressed market.

'They have more room to maneuver,' said Carlos Rodriguez, whose hotel development firm, Driftwood Hospitality, used Lehman for about a third of its projects. ``You're playing with profits rather than playing with losses.'

Rodriguez said all of Driftwood's projects are generating enough cash to make loan payments, so swapping Lehman for another lender won't affect his company.

But developers battered by the collapse of South Florida's condominium market could face bigger consequences in Lehman's exit.

If condo sales aren't enough to pay off a Lehman loan, a bankruptcy court could decide to dispose of the troubled note as quickly as possible. That could mean a fire sale -- with the unsold condo units valued at pennies on the dollar.

A liquidation 'would mean selling those units well, well below what their value is,' said Jack Winston, a condominium analyst for Goodkin Consulting in Miami. ``What that's really going to hurt is the condo [buyers] who have already closed.'

Don Peebles, a Coral Gables developer who did not do deals with Lehman, said the accounting that will come with the firm's bankruptcy could prove that many of Lehman's stakes in local condo deals have no financial worth.

'They'll have to value all the assets of the company, [and] they'll be going on a project-by-project basis,' he said. ``The challenge going forward is: What is the actual value of these units.'

Peter Zalewski, whose firm Condo Vultures tracks distressed real estate projects, predicted Lehman's South Florida holdings would easily find buyers.

Of the $965 million in outstanding loans listing Lehman as the lead lender for large Miami-Dade projects, Zalewski said most were issued to 'solid, steady' borrowers and attractive projects. Zalewski noted about 75 percent of Lehman's Miami-Dade loans came after 2006, as the real estate market crested and the lending climate tightened. That means Lehman probably exacted higher interest rates from developers, increasing the profit potential for the loans.

'It's probably going to be a pretty attractive loan portfolio,' given the discounts a bankruptcy will bring, he said.

Lehman has about $900 million outstanding on large Broward loans, as well, according to a Condo Vultures analysis.

Analysts blame Lehman's real estate holdings for causing the firm's collapse, after it misjudged how much damage a declining housing market would do to a bank that survived the Great Depression.

Lehman had a reputation for aggressive lending in South Florida, now one of the country's worst real estate markets.

`VERY VALUABLE'

'They were very valuable for people who could not capitalize their projects as they needed to,' said Miami developer Edgardo Defortuna, who said his firm, Fortune International, usually found cheaper interest rates than Lehman offered. 'They were somewhat expensive if you could not get regular financing,' Defortuna said.

Matthew Allen, Related's chief operating officer, said Lehman was a reliable partner in the condominium giant's projects. But since Lehman has already paid its loan into Related's Trump project in Hollywood and Icon Brickell, the company's abrupt exit will have little financial effect.

'It's not going to stop me from building my building,' he said.