Banks, AIG and Commercial Real Estate [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Commercial-Property Players Find Their Pressures Growing.  “Centro Properties Group, NY developer Macklowe Properties, office-building investor Broadway Real Estate Partners LLC and others are now facing an even rougher ride in the wake of [recent] market crises. Cash-flow projections for properties are being scaled back in anticipation of a greater economic slowdown. The sales market… has virtually ground to a halt. Even creditors that were willing to make real-estate loans before the upheaval are pulling back… Shopping-center giant Centro Properties Group, which faces a Sept. 30 deadline to pay off $2.3 billion in debt, had a pending deal to sell 29 U.S. properties to DRA Advisors for $714 million. The deal collapsed last week after Centro refused DRA's request for a price cut.” (WSJ, Sept. 24) 

For Sale Sign Looming For Three AIG Towers. “Experts suggest that AIG’s aging headquarters at 70 Pine St. could fetch a healthy sum… The 775,000-sf art deco tower would make a beautiful condominium or hotel. Buildings in lower Manhattan typically sell for far less than their midtown counterparts, but 70 Pine St. could fetch between $400-$500/sf. Real Capital Analytics: So far this year, 64 office buildings have been sold in Manhattan for an average price of $814/sf. Midtown towers have fetched an average of $848/sf while properties downtown captured an average of $442/sf. Those averages represent a 10% to 15% drop from year-earlier levels.” (Crain’s NY Business, Sept. 24)

AIG's $16 Billion in Real Estate May Be Cash Source. “AIG, [in] selling assets to repay a [$85B] U.S. government loan, may seek buyers for some of its $16 billion in global real estate holdings… in more than 30 countries and 14 U.S. cities. In Manhattan alone, it controls three office buildings with 2 million-sf… AIG's plans to sell assets comes as demand for real estate slumps and banks hoard cash, creating hurdles for investors seeking financing. Moody's/REAL Commercial Property Price Index: U.S. commercial prices fell 9.7% in July from a year earlier. The index is 11.4% below its October 2007 peak. The number of transactions fell 28% in H1’08 from H1’07.” (Bloomberg, Sept. 23) 

Commercial Real Estate Loans May Be Next Shoe to Drop. “S & P’s RatingsXpress Credit Research: Since construction loans are bullet loans with interest reserves accruing until a project is completed, we expect that problem construction loans will continue to rise in coming quarters. We also expect that loss severities among defaulted construction loans will be materially higher… given sharp price declines among homes and condominium projects. Most of the failures would be concentrated in small banks, especially those with a high degree of exposure to commercial real estate. Among banks that have already failed this year, CRE loans accounted for an average 60% of loan portfolios.” (Research Recap in Seeking Alpha, Sept. 23)

Banks Up Their Holdings In Commercial/Multifamily Mortgages. “MBA: Commercial/multifamily mortgage debt outstanding grew by 1.5% from Q1-Q2, to $3.44 trillion… Commercial banks hold… $1.46T, or 43% of [all] commercial/multifamily mortgages. Life insurance companies hold $313 billion, or 9% of the total, and savings institutions hold $230B, or 7%... The GSE and agency mortgage pools hold $146B in multifamily loans that support the mortgage-backed securities they issue, and another $168B “whole” loans in their own portfolios, for a total share of 9% of outstanding commercial/multifamily mortgages. CMBS, collateralized-debt obligations and asset-backed securities… hold $762B, or 22% of commercial/multifamily mortgages. (This includes CMBS, CDOs and ABS owned by banks, life insurance companies and GSE’s.)” (Financial Week, Sept. 23)

Real Estate Bigwig Zell Sees 2009 Recession. “Real estate heavyweight Sam Zell: The U.S. economy is likely to slip into recession next year, while the single-family housing market is close to bottoming out. But on the downside… office buildings that are not top quality or located in downtown city markets will see a long, slow downward spiral. "This is not a time to own commodity (office buildings) in the suburbs," said Zell… many second-tier and suburban office buildings financed with large amounts of debt from 2005-2007 may squeeze their borrowers who are not able to refinance the principal when the interest-only loans come due.” (CNBC, Sept. 23)

                                                                               

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