• Jim Rogers on Chinese Currency and Trade War: My Thoughts
    asiablues
    03/20/2010 - 19:47
    My take on views expressed by Jim Rogers at a BBN interview on Mar. 18 about the recent currency and trade confrontation between the US and China, the Canadian loonie and the U.S. bond market.
  • Armstrong Economics: Entering Phase II of The Debt Crisis
    Chopshop
    03/20/2010 - 04:48
    Phinance's phavorite political prisoner, Martin Armstrong, cautions that "the EU is in dire position", on the precipice of shattering. Since "debts will never be paid and interest expenditures are the greatest transfer of wealth in history ... Western society is falling apart ... If we do not act, civil unrest will explode. The current choice is DEFAULT or HIGHER TAXES & CIVIL UNREST ... Someone has to step forward to save us or we may be doomed. It's time to wake up for this is the future of our children and their children at stake. "
  • China's Fragile Economy, Its Housing Bubble, and What It Means To Us: Download
    Econophile
    03/20/2010 - 00:41
    As promised, here is the complete article, "China's Fragile Economy, Its Housing Bubble, and What It Means To Us," in a downloadable PDF. You can download it, print it out, and read the entire piece at your leisure. The conclusions aren't encouraging, for them or us.

More Reggie Middleton on Commerical Real Estate

Reggie Middleton's picture
Submitted by Reggie Middleton on 11/27/2009 13:28 -0500



The TCO reports are now available. Here is an excerpt from the Professional level report:

#000000;">The following table summarizes the valuation of each property through NOI-based and CFAT-based approaches. Individual property valuations will be discussed in detail separately, and released to professional subscribers.

Click to enlarge...

tco_ltvs.png#000000;">                      
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.

It is noteworthy that properties with high LTV include a) the new developments during 2005- 2008 phase and b) the existing properties against which additional debt was raised during 2005-2008. Among the properties with LTV of more than 80%, Northlake Mall was the new development in 2005, The Piers Shops was acquired in 2007, while additional debt was raised against International Plaza, The Mall at Short Hills, The Mall at Wellington Green and Waterside Shops during 2005-2008.

#000000;">Additionally, there are four properties - MacArthur Center, The Mall at Partridge Creek, Stony Point and Westfarms - with LTVs in the "immediately at risk" zone.

So, I am sure many are wondering if these properties are destined to be written off, or what??? Well, let's look at the trend...

cap_rate_trend.png

Sharply rising cap rates combined with...

mall_vacancies.png

  Dramatically increasing mall vacancies.

Subscribers can download the full reports here:

TCO Report - Retail TCO Report - Retail 2009-11-27 11:41:15 355.95 Kb

TCO Report - Professional TCO Report - Professional 2009-11-27 11:42:05 663.14 Kb

I will probably be releasing the lenders to these properties in the upcoming week. Any banks that have economic interests in these properties, or others should feel free to reach out to me.

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by Anonymous
on Fri, 11/27/2009 - 16:00
#144331

Reggie, Reggie. You and your .

So what are you showing me here maybe 10 who are "far underwater". Out of how many nationwide please.

Robust context separates the good reports from the bad.

After the development boom during the decades of 1990 and 2000 and during the worst recession/depression that this country has ever experienced, we are only looking at 8.6/10.3% mall vacancy?

As the old Wendy's ad use to say: Where's the BEEF?

I know you love to deliver the shock value so I'm surprised to see so little. Too much tryptophan?

by RockyRacoon
on Fri, 11/27/2009 - 16:45
#144386

Excellent observations and questions.  Myself, being afflicted with postprandial somnolence, I was unable to coherently formulate a question!  You are either immune or a vegetarian...

by Kevekev
on Fri, 11/27/2009 - 16:54
#144402

So what are you saying anon 144331?  CRE is not that bad and wont get worse?  The problem is blown out of proportion?  Rents are going to increase along with property values and vacancies will go down in our solid V shaped recovery?  Well, maybe your right, after all, we are told that the recession is over!  Are you Dennis Kneale?  Keep up the good work Reggie.

by the phantom
on Fri, 11/27/2009 - 17:14
#144417

I actually walked right past Dennis Kneale in my neighborhood and it took every last ounce of strength to not punch him in the face.  That and the fact he was holding in little girls hand.  God, I hope he doesn't live close... seeing him around would suck.

by Anonymous
on Fri, 11/27/2009 - 17:51
#144453

I cannot believe he does not have a security detail. I wonder if "someone" saw that cuntface in the wild would they unleash a brutal superman punch in his talking head cuntface?? Hum, I wonder? (5th rule punishment averted).

by Reggie Middleton
on Fri, 11/27/2009 - 17:41
#144447

I don't see what the ambiguity is. You see all of the properties, nationwide, in the chart and you see what is underwater. You speak as if CRE is not trending downwards. We have a high vacancy rate that is trending higher in the face of deteriorating fundamentals and a horrible macro outlook. What makes you think things won't get considerably worse than they are now?

by Anonymous
on Fri, 11/27/2009 - 18:02
#144458

I dunno, 90% occupancy rate at mid to late 2000 lease terms.

Usually if I want to make an educated appraisal of a marketplace I look at many more factors that you are looking at.

But I'm not a sensationalist with Zero skin in the game.

Correct me if I'm wrong but are you saying you have listed "all of the properties, nationwide, in the chart". All of them? Your chart looks really small to be listing all mall properties in the US.

by Reggie Middleton
on Fri, 11/27/2009 - 19:17
#144511

I listed all the properties owned in whole and in part, by the subject of the analysis - and the anlaysis happens to be rather comprehensive. The company actually has a <!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:-1610611985 1107304683 0 0 159 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman","serif"; mso-fareast-font-family:"Times New Roman";} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:10.0pt; mso-ansi-font-size:10.0pt; mso-bidi-font-size:10.0pt;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} --> negative releasing spread (the opening rent on new leases lower than the closing rent on expiring leases), so those 2000 lease terms will be rolling over to 2010 lease terms that will look much less appetizing. If I was a sensationalist, I would have included more of the report here, but I didn't. 

You "anonymous" guys are so negative, you don't even bother to completely read what it is you are bitching about. The post contained an excerpt from a forensic analysis of a specific REIT, but apparently you seemed to have read something else.


by Reggie Middleton
on Fri, 11/27/2009 - 19:18
#144512

I listed all the properties owned in whole and in part, by the subject of the analysis - and the anlaysis happens to be rather comprehensive. The company actually has a negative releasing spread (the opening rent on new leases lower than the closing rent on expiring leases), so those 2000 lease terms will be rolling over to 2010 lease terms that will look much less appetizing. If I was a sensationalist, I would have included more of the report here, but I didn't.

You "anonymous" guys are so negative, you don't even bother to completely read what it is you are bitching about. The post contained an excerpt from a forensic analysis of a specific REIT, but apparently you seemed to have read something else.


by Anonymous
on Fri, 11/27/2009 - 17:29
#144430

Citing CBRE on cap rates understates how low they went (into the mid-6's) and how high they are now. CBRE is a highly aggressive broker that shilled prices to their extremes in 2006 and can not be trusted to deliver any meaningful analysis that is not self-serving, imo.

Simply put, there are not enough transactions or liquidity to determine value.

I rank the following sources for CRE data, 1) Real Capital Analytics, 2) Korpacz reports, 3) CoStar.

Caveat emptor, indeed.

by Reggie Middleton
on Fri, 11/27/2009 - 19:22
#144516

I agree that a diversity of sources are needed, which is why we have used all of the sources you have mentioned, save Korpacz, to feed the analysis. You sound like you would be happy with my work.

by Anonymous
on Sat, 11/28/2009 - 14:35
#144906

Ask Tyler to forward Korpacz to you, or I could. It has some interesting comments.

by Anonymous
on Sat, 11/28/2009 - 05:23
#144699

Once the Deflationary Spiral resumes full force there will be no doubt we are in a depression. Vacancy Rates for most commercial rates will skyrocket. Predictions for the peak: Offices 50%. Retail 50%. Industrial 25%. Apartments 15%. Put that in your pipes you stupid bulls. Long SRS.

by Zeppelin5637
on Sat, 11/28/2009 - 23:57
#145223

Concur.   BofA executives warned several top commercial real estate developers in the Charlotte area of the coming desperate situation a year and a half ago.  We have yet to see the full effect of this problem.

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