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When is the secondary to roll over RBC notes?
Just took a walk through an upscale urban SF neighborhood yesterday. Let me tell you restaurants were dead except cheap takeouts and coffee places. Almost all "corner anchor" commercial bldgs. had for lease signs up. I sell Ca. R/E backed munis and I have seen the 90-91 R/E crash. It took 5 years or more for R/E took come back to even. This time it's much worse. Unless the government backs CMBS starting Q4 you are looking at a generational pancake of 10-20 years to make reasonable returns. Loss of municipal tax revs and just who will foreclose are still major near term problems. At least rents will be a lot lower. I hear FLA is even worse.
Trillions more in monetized debt? What else can they do?
All that praise for a gain of a couple bucks over the next year (?) -- look at their 12 month price target.
Love that the article was saved as "idiotic report".
Anecdotally, a friend is doing a work-out for a small retail house goods company, and was offered...FREE RENT on 10,000 sq. ft. The landlord begged, "please don't close the store, you'll bankrupt the center." Other leases he's renegotiating are being marked down 50 - 75%.
MI (regional bank, one of the highest CRE % exposure of any, and no 'important' buyers of the stock so far) just broke above its 200DMA for the first time in a year. This just smells like total Junk capitulation.
what's idiotic about the report?
Anecdotally, I have a friend that's acting as the receiver for a home goods retail company that's in chap 11. He was recently offered - FREE RENT on 10,000 sq. ft. The landlord begged him not to go dark, as it would push the center into BK. Additionally almost every other landlord is willing to reduce rents 50 - 75%.
From Lawrence Delevingne article on 10 bubbles in the making
9. Commercial real estate bubble: This bubble is already hissing, if not popping outright.
While the economy is improving and some home sales are slowly coming back, the commercial real estate market could get far worse.
As The New York Times reports, "Even though industry lobbyists were able to persuade Congress to extend a loan program aimed at prodding the stalled securitization market back to life, several analysts said it was unlikely to head off a spate of defaults, foreclosures and bankruptcies that could surpass the devastating real estate crash of the early 1990s."
As UPI notes, commercial mortgage defaults could reach 4.1 percent by the end of the year, up from 2.25 percent in the first quarter, and Real Capital Analytics estimates commercial property loans worth $83 billion have been involved in default, foreclosure or bankruptcy in 2009.
Badly hit will likely be malls. "The next financial tsunami to hit will be the widespread failure of shopping center mortgages," says Peter Monroe, co-chair of REOMAC, a not for profit trade association to CNBC. "Half a trillion dollars of commercial loans financed on historically low rates, are due for refinancing in the next three years," says Monroe. "The negative impact of these shopping center mortgages is enormous."
Another example of delusional thinking. REG has exposure in some of the worst markets in the country (Florida & S. CA). Once again common sense is overlooked. Nice notes though!
Cool, RBC CM was at my school campus this past week getting us graduating students excited about the jobs theyre offering in M&A and IB. Some numbers for you: a staggering 4 analyst positions up for grab in Toronto. 4!!
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