The Tishman partnership that bought the CarrAmerica portfolio has been in talks with its lenders, led by Lehman Brothers Holdings Inc., since late 2008 about modifying the credit agreement, according to S&P. But so far, nothing has happened and, until now, the talks have been kept quiet. "We have confidence in the long-term value of the properties," Rob Speyer said.

S&P warned even if Tishman wins new covenants, its ability to refinance the loans in 2011 "will likely require additional capital investment or a recapitalization."

The woes of Tishman and other landlords is stoking fears among regulators and bankers that turmoil in commercial real estate may derail the hoped-for economic recovery. There are more commercial-mortgage-backed securities outstanding than credit-card debt, student loans and car loans combined and many of those loans are going bad rapidly. About $128 billion in office buildings, hotels, stores and other commercial property are in default, foreclosure or bankruptcy, according to Real Capital Analytics.

Tishman took advantage of easy credit and didn't put much of its own cash into its troubled deals. In the $2.8 billion CarrAmerica transaction, Tishman recruited about a dozen partners, including Lehman, to put equity into the highly leveraged deal, according to people familiar with the matter. The seller was Blackstone Group, which sold the portfolio for an enormous profit just months after buying it from CarrAmerica Realty Corp.

The Speyers point out that their firm has made more than 20% annual returns on investments since its inception three decades ago, and currently has more than $2 billion of liquidity to invest in new deals. In the phone interview that included Rob Speyer, Jerry Speyer noted that his son also was responsible for selling more than $12 billion of property at the top of the market.

Tishman's Distraction
But the foundering deals remain a blow to Tishman Speyer's reputation, which was honed over the decades as the company's reach extended from New York to the rest of the world. The company became known for solid returns and smart deal-making. But now the troubled deals have become a distraction as company officials wrestle with creditors to restructure debt.

Another headache is resulting from the 2007 leveraged buyout of Archstone, in which Tishman and Lehman each put up $250 million in equity for control of the company. Lehman also cobbled together a $20 billion financing package, with $7 billion sold to Fannie Mae and $2 billion to Freddie Mac. Lehman, Barclays PLC and Bank of America Corp. together provided a $4.6 billion bridge-equity loan to get the deal done.

Archstone has struggled to sell buildings to pay down debt. The properties are current on their debt service but needed a capital infusion earlier this year. Lehman received the bankruptcy court approval to put $230 million more into Archstone, hoping its big city luxury apartments regain their value on the other end of the recession.

An even bigger problem is the Peter Cooper Village and Stuyvesant Town transaction. A venture of Tishman and BlackRock Realty Advisors financed its $5.4 billion purchase of the complex with $4.4 billion in debt. As the weakening New York economy hinders the venture's ability to boost the rental income of the complex, the project is running the risk of defaulting.

The venture is burning through its interest reserve used to pay the difference between the property's cash flow and debt service. It is expected to be depleted by early next year. In the past, the partnership has said it would put up more capital as needed.

Jerry Speyer said that any potential loss in his company's troubled deals represent only a "small part" of the profits it has reaped over the years. "If you don't take any risks, you don't have any rewards," he said