McKinsey Study Finds European CRE Financing Industry Was Never Really Profitable

Yet one more nail in the CRE coffin, and another reason why extend and pretend will be with us for years to come, lest investors wake up and find out just how screwed this country's economy really is. In the meantime, IYR is going to the moon. A new McKinsey study looks at the CRE lending industry and finds some very disturbing things. Such as that even in the peak market years of 2006-2007 the European CRE finance industry did not cover its cost of capital!!! One can only imagine what the reality must be like currently in the dead zone that is European Commercial Real Estate financing (and also in those barbaric lands west of the Atlantic). Yet somehow the Euro keeps appreciating every day against the dollar. Let the Kool Aid flow.

Reggie Middleton's picture

How bad will the luxury hotel market get? Well,,, Pretty bad. All of those BS, "better than expected" earnings surprises off of severely lowered estimates stem not from top line revenue gains or economic progress, but from hacking jobs and cost cutting. Ya' think those Four Seasons', et. al. hyper-luxury executive suites are included in those cuts somewhere??? Here are all of those pretty graphs and interconnected hyperlinks to help tell the story...

Four Seasons Hotel In New York Is Latest Victim Of CRE Crash

The CRE crunch continues claiming victims, with the latest being the Four Seasons Hotel in New York. And while Stuyvesant Town is some dinky little project somewhere on the East side of New York (or so prevailing thought runs), which few care if it goes belly up or not, the fat cats that frequent the opulent hotel on 58th street next to the brothel, pardon, gentlemen's club, which is Tao in all but name, may be a little more concerned about this one. In addition to the Four Seasons, three other luxury hotels, which back a loan sent to a special servicer 10 days ago include the Four Seasons Biltmore Resort in Montecito, the ritzy Las Ventanas in Cabo, the destination of many a banker closing dinner, and the San Ysidro Ranch in Montecito.

CRE Update: CMBS Deterioration Accelerates, L.A.'s 550 South Hope Tower Appraised At Half 2007 Value

August CRE trends continued their downward trends, with a bevy of trackers of CMBS performance, Moody's, Fitch, Realpoint and TREPP seeing substantial deterioration in September. According To TREPP the August delinquency rate was up to 4.35% from 4.03. Legacy rating agencies Moody's and Fitch indicated a comparable acceleration in delinquency trends, with September 60-delinquencies at 3.64% and 3.58%, up from 3.04% and 3.23% respectively. New CRE NRSRO Realpoint had an even higher September reading at 4.15% up from 3.47% in the previous month.

The Next CRE Casualty: Union Square's W Hotel

With the New York's Stuy Town implosion getting picked up by the Wall Street Journal months after being written about on Zero Hedge, the question now is what the next landmark property to go bankrupt will be. According to Real Estate Alert, the iconic Union Square W Hotel may just be it. The hotel, which was acquired by Dubai's troubled sovereign wealth fund, Istithmar, for $285 million in 2006 (one of the few acquisitions of a hotel at a price of more than $1 million per room) has been bleeding cash lately after room rates have declined by 24%. The result has been an inability for the owner to even meet debt service obligations: a sure sign the current balance sheet is doomed, with an outright default just a matter of time.

Goldman Forecast On CRE REITs: "Flat To Down 15%"

It is sad that modern capital markets have gotten to a point when neither fundamental nor technical analysis matters. The only question is how many dollars with the Federal Reserve print tomorrow and how higher will that push stocks. For those deluded amongst you who still believe 10,000x EV/EBITDA is marginally to quite-marginally rich, and don't feel like chasing trends and passing the hot potato to the latest Down syndrome afflicted E-Trade client, here are some observations on arguably the most overbought (by a metric mile) sector, REITs, courtesy of masters of the (metric) universe, Goldman Sachs.

FDIC Sells $234 Million Of CRE Loans At 30% Discount, Beal Bank Largest Bidder

The FDIC keeps auctioning off its busted CRE loan portfolio, most of it remnants collected from failed banks which it had to pick up. With the recent additions of Colonial and Guaranty, look for this list to explode. In the meantime, in June, Sheila's agency saw only 45 CRE loans auctioned off, for a total of $234 million at a $163 million purchase price, a 30.4% average discount, which has been declining over the past 5 months in line with the overall market.

Richard LeFrak Not Optimistic On CRE

Richard LeFrak on the long, hard path before commercial real estate (and he should know). Also, in a stunning development Ivanka explains CMBS (which she undoubtedly learned from fiance Jared Kushner who knows all about CMBS and 666 Fifth Avenue)

S&P Commits Professional Suicide With Ratings Round Trip, Underlying CRE Remains Toxic Garbage

Rare? Medium Rare? Medium? Well Done? S&P? Indeed, as the last peg in the gradation of burnt to a crisp, S&P smells completely done. As in there isn't even left a shadow of a doubt that all S&P does is pander to the solicitations of whatever few remaining clients it may have, or, as the case may be, the U.S. government. Any credibility S&P, which one would be excused for confusing with Sycophantic & Pathetic, may have tried to salvage over the past 6 months has been gutted and left to dry after this most recent fiasco, which is the final straw on theMcGraw-Hill subsidiary's expedited route to the NRSRO utterly discredited trash heap.