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HenryTo
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 Posted: Tue Sep 04, 2007 11:58 pm Post subject: Commercial Real Estate |
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http://www.bloomberg.com/apps/news?pid=20601087&sid=a6CPQun5.3bQ&refer=home
| Quote: | Average prices for commercial properties might drop 5 percent to 15 percent in the next two years depending on the type of property and its quality and location, said Matthew Ostrower, an industry analyst at New York-based Morgan Stanley, the second-largest U.S. securities firm by market value.
The Bloomberg Office Property Index of real estate investment trusts has dropped 24 percent since reaching a record high on Feb. 8, just as Zell sold his company to Blackstone in the largest real estate takeover. The index had dropped 27 percent through Aug. 30 before stocks rallied the next day after President George W. Bush and Federal Reserve Chairman Ben Bernanke pledged to prevent credit losses from snuffing out the country's economic expansion. |
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Commercial Real Estate Replies |
nodoodahs
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| Posted: Tue Mar 17, 2009 8:08 am Post subject: |
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Just too darn hard to put a short on retail REITs as a group. Can short names, but then there's the borrow. Options on the RTL etf are probably as scarce as the borrow on shorting it.
Agreed this sector is probably toast, but not sure there's any better vehicle (at the retail level) than SRS.
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HenryTo
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HenryTo
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| Posted: Sun Mar 01, 2009 2:51 am Post subject: |
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Mortgage Bankers Association seeking to expand the scope of the TALF to include CMBS:
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Mortgage group seeking further expansion of TALF
Tue Feb 24, 2009 7:13pm EST
By Al Yoon
NEW YORK, Feb 24 (Reuters) - The Mortgage Bankers Association is lobbying the U.S. government to expand the reach of a $1 trillion lending program to existing commercial mortgage-backed securities, an MBA executive said on Tuesday.
The MBA is making headway in its initiative to get the Federal Reserve to provide funding for investors who would purchase the outstanding commercial mortgage bonds that are clogging bank balance sheets, in addition to new ones, Jan Sternin, a senior vice president of the MBA's commercial mortgage group, told Reuters.
"There's been indication that we are down the road" toward making existing commercial assets eligible, Sternin said.
U.S. Treasury Secretary Timothy Geithner earlier this month announced an expansion of the Term Asset-Backed Securities Loan Facility (TALF) from consumer loans to mortgages on commercial properties, and in size from $200 billion. The program, to be launched soon, is aimed at unfreezing consumer credit markets by focusing funding on the purchase of new loans.
The problem is that the credit crunch has halted issuance of CMBS, whose yields around 15 percent have put a stop to new lending, analysts said. Programs that would provide bids for outstanding assets, such as TALF, could help create a floor that would attract other buyers, they said.
Jump-starting CMBS would also be challenged by the current environment for office, retail and apartment buildings, where delinquencies are rising and property values are falling. |
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rffrydr
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rffrydr
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| Posted: Sun Feb 15, 2009 7:45 am Post subject: |
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I wonder if they're pressing the July move owing to their satisfaction or doubling down?
This would be odd for all the talk of the Geithner non-plan. Maybe it's close enough for govt. work 
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HenryTo
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| Posted: Sun Feb 15, 2009 2:36 am Post subject: |
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Lone Star Funds' ambitious play: Aiming $10 billion to invest in distressed commercial real estate (and another $10 billion for distressed RMBS):
https://www.cmalert.com/headlines.php?hid=28019
| Quote: | With its new commercial real estate fund, Lone Star seems to be positioning itself to become a major buyer of toxic commercial real estate debt from banks and other holders. Sales of such assets are expected to pick up in coming months as the U.S. Treasury Department and Federal Reserve expand their financial-rescue efforts. A $200 billion Fed program that finances buyers of high-grade consumer receivables is being increased to as much as $1 trillion and broadened to include commercial real estate mortgages and commercial MBS. Also, the government plans to team up with private-sector players to buy up to $1 trillion of toxic assets from banks.
Lone Star has already established itself as a major buyer of distressed debt. The $7.5 billion Lone Star Fund 6 made a big splash last July by acquiring $30.6 billion of troubled assets - mostly related to residential mortgages - from Merrill Lynch at a 78% discount. Around the same time, that fund also acquired a $9.3 billion portfolio of home mortgages and related servicing operations from CIT Group of New York for $1.5 billion of cash and $4.4 billion of assumed debt.
The commercial real estate fund will have a global focus, seeking investments in the U.S., Europe and Asia. But it will likely put a heavy emphasis on the U.S., where there is a rising tide of distressed opportunities. Investors expect the fund to buy a wide range of distressed assets, including CMBS, other real estate securities, whole loans, B-notes, mezzanine loans and foreclosed properties. |
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HenryTo
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| Posted: Thu Dec 25, 2008 1:58 am Post subject: |
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Morningstar's latest commentary on the commercial real estate market - with an emphasis on commercial REITs:
http://news.morningstar.com/articlenet/article.aspx?id=268867
| Quote: | Excessive leverage, tighter lending, and falling cash flow foreshadow a shifting return paradigm for REITs and other CRE owners. The days of leveraging assets with easy credit predicated on unrealistic forecasts of constantly increasing cash flow are over. Now there appears to be a large pool of highly encumbered assets that are worth less than the debt they secure (also known as "underwater") just as acceptable loan/value ratios are falling. Barring heroic (risk-seeking?) back flips by lending institutions or government initiatives, many REITs will have to reduce debt outstanding as it comes due in order to satisfy current loan/value standards in light of reduced asset prices. This is not an easy feat, considering that most of the cash that REITs generated recently has already been paid to equity holders in the form of higher-than-advisable dividends.
When cash isn't available to reduce debt, REITs must raise capital. The cheapest source of capital at this point is cutting the dividend, which is already occurring and should continue. However, this dollar value often pales in comparison to debt maturities and therefore generally isn't a sufficient solution. Assuming new or refinanced debt is unavailable at the scale and price needed--as is predominantly the case today because commercial mortgage-backed security and high-yield markets are effectively nonfunctioning--REITs must then turn to asset sales, including outright asset divestitures or taking on equity investors via joint ventures. At the moment though, even this option is not guaranteed. Various industry sources have indicated that CRE transactions are down by 70% compared with year-ago levels, as the combination of tight lending standards and expectations for falling property values has created a virtual abyss between buyers and sellers. Developers Diversified Realty (DDR) is a timely example: A joint venture sale valued at nearly $1 billion fell through after the deal seemed certain just a couple of months ago. Now the firm will either have to reduce the selling price, sell higher-quality assets, or both. While these are typically not attractive alternatives, property buyers are in the driver's seat as sellers are shifting their focus from capturing value to ensuring survival.
More Supply on the Way. Doh!
As the economy deteriorates, occupancy declines, and margins and rents fall, more CRE owners become distressed sellers, pressuring CRE values even further. General Growth Properties (GGP), a firm that we believe is most likely headed for bankruptcy, is the second-largest retail CRE owner in the U.S., with $27 billion of properties on its balance sheet. Over the last few weeks, there have been presumably intense negotiations to refinance a substantial amount of maturing debt, as deadlines have been extended for just weeks at a time and then come and gone. While the outcome is still uncertain, we're confident that equity holders will not be winners--assuming there are any winners at all. |
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HenryTo
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rffrydr
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| Posted: Wed Sep 05, 2007 1:23 am Post subject: |
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Remember when? Economist November '06:
http://economist.com/finance/displaystory.cfm?story_id=8326784
| Quote: | | Property is a hybrid asset. It offers a high yield, giving it bond-like characteristics. But like shares (and unlike bonds), investors can expect that income to grow, at least in line with inflation. |
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| Quote: | | Such companies look ideal from the point of view of buy-out groups. Today's property barons can borrow against the value of the assets and use the cashflow from rental income to meet the interest payments. With property values rising fast in some sectors (the American office sector has returned 38% to date this year), they can afford to strike the deals above their stated asset value. |
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| Quote: | Yields on the most commonly held American REITS are lower than those on treasury bonds, while prime British properties yield less than gilts. In both cases, enthusiasts say there is no need to worry since rents are set to rise, bringing the prospect of higher yields.
Relying on prospective valuations is exactly what stockmarket investors were forced to do in the late 1990s. And it is worth recalling that previous surges of cross-border property investment (Japan in the 1980s, for instance) did not end well. |
As time has taught us, this an entirely different market than the consumer mortgage market. Corporate clients have never looked better. Residential investors? They're just human beings.  [/quote]
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