This page has been archived and commenting is disabled.
Morgan Stanley, Real Estate, Bad Deals, and Blogs
At least a few MDs at Morgan Stanley DO read my blog, but it is obvious
that the guys in the real estate division don't. Early in 2008 I named
Morgan Stanley the "The Riskiest Bank on the Street". The following is one of the reasons why. From Bloomberg: Morgan Stanley Surrenders Five San Francisco Office Towers Bought at Peak
[In reading this, notice the extreme irony in one of the country's
largest investment banks walking away from a property deal, and
contrast it to a homeowner in the same position. Hey, if MS can do it,
why can't I?]
Morgan Stanley,
the securities firm that spent more than $8 billion on commercial
property in 2007, plans to relinquish five San Francisco office
buildings to its lender two years after purchasing them from Blackstone
Group LP near the top of the market.The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes,
a Morgan Stanley spokeswoman, said yesterday in a telephone interview.
AREA Property Partners will take over the buildings, which have been
held by the bank’s MSREF V fund. Barnes declined to say when the
transfer will occur.“It’s not surprising this deal ran into trouble,” Michael Knott,
senior analyst at Green Street Advisors in Newport Beach, California,
said in an interview. “It was eye-opening among a group of eye-opening
deals. There was almost no price too high in 2007 for office space in
top gateway markets.”The San Francisco transfer would mark the second real estate deal to unravel this year for Morgan Stanley,
which bet on the property markets as prices were rising. The firm last
month agreed to surrender 17 million square feet of office buildings to
Barclays Capital after acquiring them for $6.5 billion in 2007 from
Crescent Real Estate Equities. U.S. commercial real estate prices have
dropped 43 percent from October 2007’s peak, Moody’s Investors Service
said last month.Lost Value
The Morgan Stanley buildings may have lost as much as 50
percent of their value since the purchase, Knott estimated.“This isn’t a default or foreclosure situation,” Barnes
said. “It is a negotiated transfer to our lenders.”
Morgan Stanley bought 10 San Francisco buildings in the
city’s financial district as part of a $2.5 billion purchase
from Blackstone Group in May 2007. The buildings were formerly
owned by billionaire investor Sam Zell’s Equity Office
Properties and acquired by Blackstone in its $39 billion buyout
of the real estate firm earlier that year.The buildings Morgan Stanley is giving up are One Post, 201
California St., Foundry Square I, 60 Spear St. and 188
Embarcadero. The towers have a combined 1.3 million square feet,
according to Colliers International.The bank will continue to own the other office buildings it
acquired in the Blackstone deal, Barnes said.Morgan Stanley, based in New York, was the biggest property
investor among Wall Street firms at the time of the purchase.
The transaction made the company one of the largest office
landlords in San Francisco, adding 3.9 million square feet of
office space there.Defaults Rise
Commercial mortgage defaults more than doubled in the third
quarter from a year earlier as occupancies fell, according to
Real Estate Econometrics LLC. Office vacancies will reach a
near-record 19 percent in the first quarter of 2011, broker CB
Richard Ellis Group Inc. estimated.Property sales financed with commercial mortgage-backed
securities plunged 95 percent from a record $237 billion in
2007, according to JPMorgan Chase & Co. A lack of securitized
debt is driving down values, which may fall 55 percent from
their peak, Moody’s said.San Francisco prime office rents fell 37 percent in the
third quarter from a year earlier, the biggest decline since
2001, as companies cut jobs, Colliers said. The vacancy rate
rose to 14 percent, the highest since 2005. Almost 1.4 million
square feet of space was returned to the market in the first
nine months of the year.
In September of 2007, in the very first post on my blog, I announced
that the CRE market would crash. I made the announcement again in
December of that year and even created a schedule of who would be
crashing with their CRE sales. See "Will the commercial real estate market fall? Of course it will" 09 December 2007.
Thus far, quite a few guys on that list have gone bust. How was I able
to do that you ask? Well, they paid too much money using too much
leverage at the top of what was an obvious bubble. In addition, things
were so frenetic that they were literally (well almost) day trading
assets that took 3 month or so to transfer at a roughly 7% transaction
cost. Last time I looked (okay, maybe time before last), real estate
was an income investment, not a trading vehicle for instant capital
gains. Sure you can improve the property and extract value elsewhere,
but come on... Flipping entire mutli-billion dollar portfolios in a
matter of days or weeks??? If that wasn't a sign of the top, I wouldn't
know what was.
This is an excerpt from that post in December. Notice, half of the
companies on this list either have, or will soon cough up those
properties that they bought (read the entire article for context):
If you think these numbers might look just a little hairy, just wait
and see the numbers of the companies that I am actually shorting. The
one's above were actually cut off of the short's short list, so to say.
Once you see, you will be a believer just like me - commercial real
estate is on its way down. See comments below for more on the accuracy of the book calculations I use in my analysis vs. used in this story.Details of transactions for sale of properties by Blackstone Group
Date
Particulars of transaction
Purchaser
Amount
12th June, 2007
Sold Extended Stay Hotels
The Lightstone Group LLC
$8 billion
9th August, 2007
Sold
38 assets comprised of 106 office buildings and 5.9 million square feet
in San Diego, Orange County, San Francisco, Seattle, Portland and Salt
Lake City. The properties are from the CarrAmerica West Coast
Collection that Blackstone Group purchased last year as part of a
national portfolio.GE Real Estate-owned Arden Realty
NA
17th July, 2007
Merlin Entertainments Group, the leisure park operator owned by Blackstone, sold its property assets to
London
property firm Prestbury Group plc owned by real estate investor Nick Leslau.
Prestbury Group plc
$1.27 billion
27th August, 2007
Sold
9 suburban Chicago office complexes to GE Real Estate. Blackstone
acquired these properties when it bought Equity Office Properties Trust.GE Real Estate
$1.05 billion
27th August, 2007
Sold
a portfolio of downtown Chicago properties to Tishman Speyer.
Blackstone acquired these properties when it bought Equity Office
Properties TrustTishman Speyer
$1.72 billion
9th February, 2007
Sold
6.5 million square feet of Manhattan office space Macklowe Properties.
Blackstone acquired these properties when it bought Equity Office
Properties Trust.Macklowe Properties
$7 billion
Let's fastforward to today, where we may learn the fate of another one those
guys who bought that CRE flip from Blackrock. From Crain's Chicago
Business, "Zombie fears stalk Tishman in the Loop"
A venture led by Tishman Speyer Properties L.P. has
defaulted on part of a package of loans used to finance the
$1.72-billion purchase of six prime downtown office towers during the
frenzied real estate market of 2007, sources familiar with the deal
say.
The New York developer bought the
5.7-million-square-foot portfolio from Blackstone Group, which flipped
them as part of the New York private-equity firm's $39-billion
leveraged buyout earlier that year of Sam Zell's Equity Office
Properties Trust. [Anybody reading my blog in 2007 or even knew me in 2006 could have seen this coming a mile away!]
We can all wonder how Macklowe is doing???
BlackRock loses millions on Macklowe loans | The Real Deal | New ...
Apr 7, 2009 ... BlackRock pegged the potential loss at $53.2 million from two mezzanine loans on current and former Macklowe Properties office buildings, ...
I don't know if these loans are associated with the Zell/Blackstone
flip, but at this point, does it really matter? Practically everything
touced during that 2 to 3 year period is blowing up, particularly the
2007 vintage. Ahh, what a fine taste.
Other posts of interest from that 30 day period of two years ago...
- Do you remember when I said Commercial Real Estate was sure to fall? 20 December, 2007
- The Commercial Real Estate Crash Cometh, and I know who is leading the way! 06 January, 2008
While we are at it, let's revisit some of my observations and assumptions in the "The Riskiest Bank on the Street"
post of a year and a half ago. Some may have thought I was being a tad
bit agressive. Do you think so now? Keep in mind how much leverage is
employed when these assets are funded through VIEs (actually, who the
hell knows how much leverage is effectively employed, but you can bet
your left nipple that it is a lot).
|
Unconsolidated VIEs, Exposure to loss (in $ mn) and loss ratio (in %) |
|
|
|
Source: Company data |
|
Unconsolidated VIE's |
FY 2007 |
|
|
|
$ mn |
Unconsolidated VIE assets |
Maximum exposure to loss |
Loss ratio % |
|
MBS & ABS |
7,234 |
280 |
3.9% |
|
Credit & real estate |
20,265 |
13,255 |
65.4% |
|
Structured transactions |
10,218 |
2,441 |
23.9% |
|
Total |
37,717 |
15,976 |
42.4% |
To forecast these loss ratios, we
have used the maximum exposure to loss as the worst case scenario. For
the base case, we expect the loss ratio to be lower than the maximum
exposure to loss.
|
|
Base Case |
Optimistic Case |
Worst Case |
|
Mortgage and asset-backed securitizations |
2% |
1% |
4% |
|
Credit and real estate |
50% |
30% |
65% |
|
Structured transactions |
15% |
10% |
24% |
|
|
Base Case |
Optimistic Case |
Worst Case |
|
Mortgage and asset-backed securitizations |
109 |
54 |
217 |
|
Credit and real estate |
6,080 |
3,648 |
7,953 |
|
Structured transactions |
613 |
409 |
976 |
|
Total Losses in $ million |
6,801 |
4,111 |
9,146 |
For those of you who are interested in more of my CRE opinion, see Reggie Middleton's CRE 2010 Outlook (42 pages).
Banks and investors have been emailing me about the content of this
document. Any who are interested at having my team take a look at what
you have, download the my capabilities doc (
CRE Consulting Capabilities 2009-12-17 14:17:01 655.48 Kb) and contact me to talk. I love to talk, and I'm not nearly such a smart ass in person, really!
For subscribers, here is a refresher on the historical work on Morgan Stanley:
Morgan Stanley_final_040408 2008-08-30 06:37:54 1.38 Mb
MS Simulated Government Stress Test 2009-05-05 11:36:25 2.49 Mb
MS Stess Test Model Assumptions and Stress Test Valuation
Morgan Stanley ABS Inventory 2008-08-30 06:37:32 1.65 Mb
- advertisements -
Cash Making Opportunities - The Beginning The working life is already tough enough, but the worries of being out of work was even tougher. The unsecured working environment have prompted me to search the internet for an alternative source of extra income so that I could learn how to Make Money Work for me and be Financially Independent. I listed down a number of Free Internet Business Opportunity Ideas while researching ways how people earn money online while working-from-home.......
www.onlineuniversalwork.com
Reggie, Thanks for the post.
Not sure if you correlated your own CRE exposure research with FED bank stress test results, but a quick look would seem to indicate that Morgan Stanley is perhaps 4th down the list of CRE exposure. The top 4 would be:
1) B of A
2) Citi
3) Wells
4) Morgan Stanley
----------
As you said perhaps a price decline of 50% from the bubble peak. So how much of CMBS have made its way to the FEDs balance sheet through the GSEs? The RMBS/CMBS FED buy should end in April, but it seems that CRE defaults should just start to be critical when the FED program ends. I guess the conclusion in general is 2010 will be a very difficult year for many banks. We have a lot of items, market and accounting, that will either produce losses or exposure real balance sheet weakness. Where will these banks get financing to reorganize? Can CRE exposed banks survive with the anticipated loss rate?
----------
Considering for the moment that we may be looking at CRE with an average price reduction of 35% for 2009 (increasing in 2010). With a total CRE exposure of $1.7T, minimum of 20% default = $340B. This is not as large as the total subprime loss exposure, but still it may be a deciding factor in bank solvency. Price is also important, because prolonged weakness will eventually produce defaults and force recognition of loss. Although probably not as quickly as in the RMBS market. So the extend period could be longer before an adjustment to the balance sheet.
Wells price target after Q1 results to $14.00 from $26.78 today?
Any guesses on Citi or B of A Reggie?
Mark Beck
Nothing is too bad for MS. I note that these RE cowpies came on the heels of the class action settlement for the silver custodianship ripoff. Good on 'em.
Reggie you should just ignore all the asshole's comments like Green Sharts and rico sauve who are propably the same person anyway!
Reggie you should just ignore all the asshole's comments like Green Sharts and rico sauve who are propably the same person anyway!
Reggie, a lot of people, appreciate, that you take the time to share part of your analysis, on this blog. thanks for the education supplement
Never, ever, ever, ever should institutional investors (allocators - pensions, foundations, endowments, etc.) do business with bank-sponsored buyout, mezz, RE, hedge, etc. funds. They are trash and the conflicts of interest are enormous. Avoid them like the plague. The list of currently defunct sponsored funds is too long to list. MS' real estate funds are only one example.
For the record, the other large guys (Blackstone, Apollo, KKR, Bain, Carlyle, etc.) are only marginally better. Principals get rich regardless of the outcome for LPs. LPs are effectivel giving away a massive call option.
Thx for your effort reggie.
"The trouble with dumb bastards is that they are so dumb they think there is no such thing as a smart person"
---- Kurt Vonnegut
Reggie I haven't read your blog but I can see you have had some interesting things to say. The criticism you recieved seems unwarranted. I would just filter what they said and not let it get to you.
Reggie:
You've properly defended your position and the trolls keep coming.
Next time, please suggest to them that they invest the time and resources and produce the granularity of reporting that you do. Then, we can all compare.
The bigger picture is that Reggie is correct on what I perceive as his macro outlook, to wit, CRE is phucked and so is much of our banking system.
Frankly, here is my summary:
1. FASB 157 modification from March 09. If you can mark your assets any damn way you feel, then there is no reason on this earth to believe anything coming from the mouths of banks.
2. The Fed has given permission to the banks to roll CRE loans, with FDIC insured funds, going forward irrespective of LTV ratios and valuations.
That's all you need to know folks for a perfect recipe of fraud, deceit, and financial alchemy.
Thank you, Reggie, for continuing to post on ZH.
If I were given the opportunity to integrate some background music into this thread I would choose the theme song for The Young and The Restless.
http://www.youtube.com/watch?v=torz_CwzaTM
Reggie:
Don't worry about the haters and the nay-sayers.
You do a hell of a job educating the rest of us on CRE and related issues.
I thoroughly enjoyed reading your material and unlike some of the formulaically-challenged, I am in agreement with your basic Case-Shiller methodology.
I don't dabble much in CRE (REITs) but I do scan them occasionally and get in when they make sense ACCORDING TO MY MODEL.
Did pretty well in Aug & Sept in a couple (BXP, DRE) but I've been out since 9/15.
However, I DO feel that CRE is the next big tsunami bearing down on us and this latest little event with MS is just the overture.....
KptLt. laughing swordfish
9er Unterseeboote Flotille
Green Sharts. Are you always a prick or just on Friday's or are we just lucky today?
"Friday's"? I don't think you need an apostrophe there.
I'm pretty much always a prick when it comes to charlatans.
Yet you keep focusing on other people? How do you find the time?
Don't feel bad Reggie, this is the same pro/con that is going on in the man made Climate change group. I am learning much from all on this site.
The negatives and the personal attacks I find come from those with "other agenda" and are either threatened, scared, or fail to accept by the changes that are currently happening around us financially speaking. There is a lot of BS out there especially in the BLS stats.
Not being a financial guy, I need all the input I can get, and ignorance is financial moral hazard these days.
There are a few who are of the mindset that "everything will return to what it was before". It will not, that falacy and facade is busted, and we need to know what is going on.
The CRE failure is immenent and those that are not accepting that are simply living in a fool's paradise. That is not a bad place being sunny and all, but it will not last.
Thanks to all on ZEROHEDGE, you guys are asking the questions, and the rank and file of the financial street of the elites are just as out of touch as our current group occupying controling interests in our government.
"In death a mamber of Project Mayhem has a name. His name is Robert Paulsen".
There are going to be a lot of "Bob's" soon.
I like Meatloaf anyway, both the food and the music.
Reggie -
You should change your picture. You look like an idiot.
Your's suits you perfectly...
I'm with you Reggie, you put a huge effort in. The fact that you choose to share some of it pro-bono on zerohedge is gratefully received.
I don't care about the formulae, the collation and presentation of all that raw data is enough for most of us to get the picture.
If one had a suspicious mind, one might think malicious posters had another agenda.
Well, while a lot of guys on the buy side may like me, I am not nearly as endeared by some of the sell side guys or the c suite crowd in some banks and RE companies.
I have quite a few sell side subscribers, but there are some that really don't like what I have to say - primarily some of the guys in affected areas that I comment on rather frankly. Hey, you can't please them all.
All that really matters is whether or not Tarp and surrogate Fed money is going into commercial properties in 2010...if so, its just like the banks..financials and fundamentals don't matter...government cash pumped into zombie REITs will be the orders of the day...
I don't need a fancy formula to tell me that when the price of office rents are down 35% and there's a 19% vacancy rate, the cash flow is hurtin'. The value of CRE is its cash flow, sans bubble.
Is Reggie the `Cramer` of Zero Hedge?
he grabs on to a sensational headline and makes much the same mistake as local newspaper columnists "MS gives back huge portfolio" . when the fact is that a fund CONTROLLED by MS gave back the properties.
yeah it was a big asset. but MS house capital was no more than 2% of the total capital stack (debt+mezz+equity), and their loss will be largely offset by mgt fees colleceted along the way.
yeah MS has a big exposure to a hurtin' asset class. but Reggies post is not really going to help you understand MS business. are you going to trade on this news? before you do, better figure out whether MS had already written off the investment--i would guess carrying value was pocket change.
I'm at a loss here. Did Reggie say that this post would help you understand MS's business? The pdf report at the end of the post should go a long way in helping those who are interested, but I don't see how you draw this conclusion from my commenting on how nearly everyone who bought the Blackstone flip has or will lose money.
I'm fairly familiar with CRE. I enjoy reading your posts Reggie. I thank you for sharing information here and have no problem with you talking up your business. I actually don't quite understand the animosity from people who are offended by a pitch on a free web site.
That said, I don't understand the formula either. I assume that the way you listed it was shorthand for the actual formula that you didn't want to share. Otherwise, I'd think you'd want to explain it to someone with questions, or just tell them it's proprietary analysis or whatever.
Happy Holidays
Reggie, there is a lot you dont know. MSREF is very much like a hedge fund. MS puts in only 10% of the equity capital. Then they pull out about as much in fees (not including the perfomance based carriewd interest). The rest of the money comes from institutional investors. This is all publicly available info and common knowledge to anyone who actually works in CRE.
please knock it off with your product markreting and links to subscriber content
What you say makes sense about who has put up the $$ for the fund(s) to this ex-office leasing drone. It still doesn't take away from the fact that they paid far too much for the iron and concrete and have now been blown blown away. I just want to know who all the investors really are, but have this sinking feeling in my gut that all those large pension funds so near and dear to our hearts are worth a tad less these days...
I'm not sure I get your point. You're saying that MS puts up 10% equity to pull out more than that in fees and expenses and sticks the institutional investors with a 100% loss (at least in this purchase from Blackrock).
I just want to make sure I'm reading you correctly. You here that institutional investors???
it was a 2006 fund, so they have probably pulled out most (maybe not all) of the 10% in fees by now.
if the transaction makes a profit, MS takes 20% aboves some IRR hurdle, call it 10% (plus their original 10% share). so they get a big piece of the upside but a 2% sliver of the downside (10% share of +/- 20% of equity in deal).
there is some balance sheet impact. but they write down investment gradually as part of their reporting to investors in the fund, so its not like a sudden hidden disater hits their balance sheet all at once. and beleive me, they saw this one coming a year ago or more.
Thanks Reggie, your insights are always welcome on my screen.
Umm, I'm just a casual observer, and not a fan of the hate, but Green Farts did post what appears to be a reasonable critique of the problem he had with your formula. I'm eagerly awaiting your rebuttal.
Nice work Reggie. I find your analysis not only thorough but compelling. So refreshing compared to the utter and complete garbage put out by the investment banks. Obviously, rico and shart boy read the drivel put out by the banks and treat it as gospel. Keep up the good work my good man...
Thanks, Reggie.
Here's a question that I haven't seen mentioned regarding this news. How much tax liability does MS have here by walking away?
If a homeowner walks away from an underwater house, I've read that they are on the hook to the IRS for the portion of the loan that isn't paid. I.e. the IRS views that money owed as income. I don't know if that's true, but it doesn't seem outlandish.
So, the big question is, is the IRS going to pursue these big companies or not? If not, that seems wildly corrupt and unfair. And we are paying for it.
I'll take a guess, and say that MS isn't going to pay one penny. And if that's the case, where's the media coverage on this one? There's a lot of bailout money here that could be recovered, and if this is true, Obama is giving the big boys a huge undocumented bailout.
"If a homeowner walks away from an underwater house, I've read that they are on the hook to the IRS for the portion of the loan that isn't paid. I.e. the IRS views that money owed as income. I don't know if that's true, but it doesn't seem outlandish."
I don't think that's technically true. If you owe a bank money and they forgive the debt and you keep the asset, that can be income, I believe. But that's different from defaulting and losing the asset. Like anything else involving the IRS, there's bound to be pages and pages of regulations and examples "explaining" how this works. Thus the need for tax accountants and lawyers.
My layman's understanding here is that the IRS still views the unpaid balance as income, regardless of whether it's forgiven.
For example, let's say you get a loan for $100,000, and buy a house with no money down, and only pay on the interest before walking away. If the Bank only gets $50,000 back from (say) a foreclosure auction, you're still on the hook for $50,000. In the IRS's view, that's now viewed as income, and they are supposedly claiming that you owe taxes on this.
I have no idea if this is true or not, but it is the scare story being propagated in some MSM publications. Presumably to keep people from doing what the Banks are doing.
If this is indeed true, then the question is whether the same rules are being applied to the big companies like MS? And if it isn't, then why not?
When a homeowner walks away on a home, the difference between what the bank later sells the house for, and the amount owed on the home is indeed considered income by the IRS. HOWEVER, I do believe that Bushes original stimulus package forgave this income for the years 2008 and 2009, but I could be wrong on this as I was not paying attention to this portion of the law when it was passed and I am not a lawyer or a tax man.
Maybe one of the many tax lawyers could clarify this for us with a definitive.
From a publication put out by the Poverty Law Section of the Texas Bar (may be outdated, it's from 2007, and see below):
"When a borrower becomes unable to repay a debt and the lender cancels some or all of it, the Internal Revenue Code (IRC) generally provides that the amount of debt cancellation must be included in the gross income of the borrower. This amount is referred to as "cancellation of debt, income" (CODI). The Code also provides that in certain situations a taxpayer may exclude CODI from gross income, including where a taxpayer is "insolvent (meaning that the taxpayers total liabilities exceed the taxpayer's total assets)' or where"qualified" debt (also known as "qualified principal residence indebtedness") is canceled in the course of a mortgage foreclosure. However, the rules for claiming one of these exclusions are so complex that many and probably most taxpayers who qualify to exclude CODI from gross income do not do so. As a result, some taxpayers unnecessarily include CODI in gross income. Other taxpayers fail to report CODI and fail to claim a corresponding exclusion because they do not realize that debt forgiveness is a taxable event."
Then there's this:
"The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments."
Now that you mention, I recall that one of the stimulus efforts was to mitigate the tax penalties for the forgiveness of indebtedness. Short summary:
"On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009, which significantly modified Section 108 of the Internal Revenue Code relating to discharge of indebtedness income. Specifically, if a taxpayer (or a related party) reacquires its own indebtedness in 2009 or 2010, at the irrevocable election of such taxpayer (on a debt by debt basis), the taxpayer may recognize any related discharge of indebtedness income ratably over 5 years (i.e., at 20% each year)."
So much has happened these last couple of years, it's hard to keep track and remember it all!
Oh crap. It just occurred to me that this means there is a financial incentive for the Big Boys in CRE to walk away from their loans in 2010, if the term "taxpayer" includes corporate entities. And not doing so means a significant tax liability for them. If those guys walk away, then that's going to be even more pressure on the Banks. And because of the impact on the Banks, I would expect that this law doesn't get extended.
This is truly a case of the law of unintended consequences.
Thank you for posting that. So it would seem that the MSM is propagating scare stories in order to try to keep people from walking away. Where else does one find this stuff out except from ZH?
checked my notes. For non-recourse debt, a deed-in-lieu of foreclosure (what MS did) is treated as a sale of the property using the loan balance as a price. no gain, no tax.
for recourse debt, tax on forgiven debt above fair market value (or sale price, as you say). can be defered for a time under the provision you reference.
makes a difference if loan is recourse, these MS loans were non-recourse.
calif. and arizona, are non-recourse states. only know, because I've lost property in both states
all depends on your basis. no loss, no tax. its people who did cash out refi's that are in trouble
So - is commerical real estate going to crater in 2010 or not? Should I sell my DRV?
As you can tell you need to subscribe to Reggie's blog to make money...
DRV is for day trading, period. If you don't know where you're going to sell, you dont belong in triple leveraged funds. Sell it, you could be waiting for ever waiting for action.
What about those who bought Fas in March. I hear that is for daytrading, period, because of decay. Is this decay real or a theoretical/nominal/marginal decay? Because we all know that adding or taking out a bucket of water from a swimming pool does adjust the water level.....and if someone added or took out a bucket every day, over a year that would be 365 gallons> In a 75,000 gallon pool does it matter?
Is the commerical market going to crater in 2010...is DRV going to $30 or $7 in 2010 ?
Reggie, thanks.
i.
Reggie, you truly are a marvel, while we're at it, let's bet they all go down and make some money off it!
Thanks again bud, looking forward to your next report