Commercial Delinquencies Rise Again, Data Goes Ignored by Equity Markets (Again)

Commercial Delinquencies Rise Again, Data Goes Ignored: Mortgage
Bankers Association

• Commercial Real Estate delinquency rates for loans held >30
  days rose to 5.69% (as REITs continue to hit record highs)
• CMBS debt has continued to have the highest delinquency rate of
  all debt by sector
• For a reminder of the early warnings on regional bank exposure,
  see the Doo
  Doo 32
• For my 2010 commercial real estate outlook (which thus far has been
  right on the money) see  CRE 2010 Overview 2009-12-16 07:52:36 2.85 Mb

•  
• A look at the Morgan Stanley CRE ventures and lesson based on what
  happens when you buy into a bubble:
  Doesn't
  Morgan Stanley Read My Blog?”. Of course you can afford to buy into
  a bubble when your clients subsidize most of your CRE losses with a
  permanent, premium free call option:
  Wall
  Street is Back to Paying Big Bonuses. Are You Sharing in this New Found
  Prosperity?
  • The huge difference between the returns of GP and LPs and the
    factors
    behind this disconnect reinforces the conflict of interest between the

    fund managers and the investors in the fund.

     

     

• A forensic peek into two REITs who have several properties
  underwater, one of which has significant debt and increasing rollover
  issues, yet all benefiting from rocketing share prices: 

  • A
    Granular Look Into a $6 Billion REIT: Is This the Next GGP?

    •  

  • The

    Taubman Properties Research is Now Available

    • 

    • The

      two deep underwater properties - The Piers Shops at
      Caesars and Regency Square were written down to the fair value by
      recording impairment charge in 3Q09. While the former is being handed

      over to the lenders for auction proceedings, the latter still remains

      with the Company and the Company continues to service its debt
      obligations.  Additionally, there are 5 more properties
      with LTV of more than 80%, making them highly susceptible to reach
      the
      negative equity territory in case of further declines in rentals or
      increase in cap rates.

• Consulting overview:  CRE Consulting Capabilities
  2009-12-17 14:17:01 655.48 Kb
• Just a remider: GGP

  and the type of investigative analysis you will not get from your
  brokerage house

Comments

[Buck Johnson]

And the market keeps going positive every day.  The funny thing about these positive days is that they seem to be positive from 5 points to 70 points, but you don't see a 300 point rally or a 300 point negative.  I think that they can't manipulate it well enough to get a massive positive like that, also how was the volume for today.

[Grandpa Bear Hug]

Your attention to detail never ceases to amaze me Reggie! I spent 6 years in commercial real estate and albeit I was not the elephant hunter, principles of analyzing investment properties are the same. I had the good fortune of representing very savvy investors who bought very little (the flip side of my good fortune) during the bubble given the faux returns. REITS and REIT ETFs do not reflect what is going on with Main Street investors.

This will end very badly...just when...?? Keep up the great posts!

vigilantgrandpa.blogspot.com

[Reggie Middleton]

Thanks. You know what amazes me is that you can pull the wool over sleepy people's eyes rather easily with derivative of derivatives and the like, but stone, steel, brick and mortar is much more substantive and harder to manipulate, or so I thought. Valuation is much more straightforward as well. It's spelled CASHFLOW and EQUITY (there is very little of the latter in many of these deals)! Despite this, many REITS (and their banking partners) have successfully sloughed off much of their debt losses onto equity investors, and have actually seen those equities rise dramatically in price. From a fundamental perspective, I see only one end to this story...

[Seer]

Hi Reggie.

Seeing as you're here (and somewhat of a captive), would you mind commenting on what you believe about "'sustainable' growth," whether you believe, as nearly all economists and politicians do, that it's possible (that it exists), or whatever...

After many years of digging into stuff it has become rather clear to me that there's a huge disconnect between the physical world (which provides us with the raw materials in which to craft economies) and the virtual world (which speaks of such things as "'sustainable' economic growth").

And thanks for digging up the underlying pieces!

[Grandpa Bear Hug]

As usual Reggie, you are dead spot on!

This euphoria on getting in early and these perceived "great deals" never cease to amaze me. The average REIT "investor" does not comprehend cash flow and return on equity let alone an internal rate of return calculation (and using realistic criteria in the model).

Thanks Reggie and I look forward to your posts.

[chet]

Interesting stuff, Reggie.  Your chart on the profitability of GPs over LPs was an eyeopener for me.  Clarifies some things.

[Entremanure]

It was almost comical.  When the news was announced this morning around 6:20am PST or so, the futures went from flat to positive almost instantly.

Fucking farce...

[Seer]

Beacuse it means an extension to free money* (for the wealthy)!

* Actually, as some have suggested, interest rates might equate to being negative, in which case the wealthy are being paid to borrow...