Somewhere in this chain are parties who are able to claim assets or collateral with values far in excess of actual market worth. To me that smells like the creditors are defrauding their counterparties.
The defrauded parties might include secondary lenders (to the property mortgage holders), regulators to whom financial instruments and solvency are being misrepresented, tenants who are paying higher-than-market rents, potential tenants who are denied market-rate rents on existing space, and arguably communities in which business and commercial opportunities are depressed due to the denial of access to real estate at market terms.
The operator of the building isn't the key point to fraud, as their interest (reducing rent to attract tenants) is actively thwarted by their creditors. The element of fraud is misrepresentation of true market value / income potential by projecting partial tenancy at elevated rates as if it were full tenancy, rather than the actual income stream at full occupancy (allowing for a nominal vacancy rate) at actually-supportable lease rates.
Yeah, I probably don’t mean fraud in the narrow criminal sense.
The thing that feels fraud-ish to me is that the loss doesn’t just disappear because nobody books it. A huge amount of capital and useful urban land is tied up preserving a fictional valuation and someone is paying for that somewhere.
Maybe it’s not a clean “X stole from Y” thing here, but it still means real businesses are displaced, worse downtowns, and less of the city that could have existed otherwise. I haven't seen this sort of thing as much in Australian cities where I'm from, but have a lot in the US where I live.
So maybe a better way phrasing "fraud on the public commons" is closer to what I mean. Everyone involved is probably acting rationally inside the system. The public still gets stuck living inside the dead space created by the fiction created by it and ends up eating that cost.
Who even is the fraudster? The operator of the building is losing money, so clearly they're not making a gain from anyone