Credit crunch crimps commercial development

Large and small commercial developments nationwide have been delayed or scrapped as lenders tighten credit standards on construction loans. Whether some of these projects will break ground or reach completion remains uncertain.

In June, Australian gambling firm Crown Ltd. backed out of a $5 billion project to build Las Vegas' tallest tower because of financing issues. The company held a 38 percent stake in the joint venture with Texas developer Christopher Milam and private-equity firm York Capital Management and will have to write off about $42 million related to the investment.

Commercial real estate projects in Denver, Phoenix, New York and even Donnelly, Idaho, have run into similar snags, while developers in housing-bust markets such as Florida and Southern California have axed smaller projects.

The problems have spread overseas. Getting project financing for the Athletes' Village in Stratford, England, has taken longer than expected, project investor Lend Lease Corp. said in a statement.

Before, developers could put up as little as 5 to 10 percent of equity behind a project and qualify for a mezzanine loan to bridge the gap between the equity side and debt side. Or developers could turn to cash-rich investors from every corner of the world.

Those investors would put up capital to start projects and the developers would buy them out of the deal using short-term debt. Now the quick change of tide has left some developers with blueprints in hand but pockets empty.