REITBull's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/256001/comments http://seekingalpha.com/article/178502-general-growth-properties-rebutting-the-bears?source=feed#comment-811465 811465 Thu, 17 Dec 2009 20:36:02 -0500 http://seekingalpha.com/article/178661-general-growth-properties-fact-checking-hovde-s-noi-numbers?source=feed#comment-810961 810961 Thu, 17 Dec 2009 13:37:31 -0500 http://seekingalpha.com/article/178661-general-growth-properties-fact-checking-hovde-s-noi-numbers?source=feed#comment-810959 810959 Thu, 17 Dec 2009 13:36:15 -0500 http://seekingalpha.com/article/178661-general-growth-properties-fact-checking-hovde-s-noi-numbers?source=feed#comment-810958 810958 Thu, 17 Dec 2009 13:35:51 -0500 http://seekingalpha.com/article/174799-general-growth-properties-one-last-look?source=feed#comment-775782 775782 Tue, 24 Nov 2009 16:57:57 -0500 http://seekingalpha.com/article/169147-moodys-few-signs-of-recovery-in-demand-for-u-s-cre?source=feed#comment-733826 733826
10%- $38.50
9%- $50.00
8%- $64.00
7%- $83.00
6%- $107.00

And these rates are based on very conservative NOI. I'm not saying 6% cap rates are coming. But with a high-barrier to entry portfolio, SLG should be trading at 7% within the next 3 years. If you wait for Moody's to tell you it's a buy, it will be too late.


On Oct 28 01:14 AM John Gault wrote:

> Apparently I've been censured. Congrats Reitbull and Tasker - you're
> right. Real estate is undervalued. Buy! Buy! Buy!
>
> FO - out forever.]]> Wed, 28 Oct 2009 10:04:57 -0400
10%- $38.50
9%- $50.00
8%- $64.00
7%- $83.00
6%- $107.00

And these rates are based on very conservative NOI. I'm not saying 6% cap rates are coming. But with a high-barrier to entry portfolio, SLG should be trading at 7% within the next 3 years. If you wait for Moody's to tell you it's a buy, it will be too late.


On Oct 28 01:14 AM John Gault wrote:

> Apparently I've been censured. Congrats Reitbull and Tasker - you're
> right. Real estate is undervalued. Buy! Buy! Buy!
>
> FO - out forever.]]> http://seekingalpha.com/article/169075-cmbs-bonds-downgraded-on-special-servicing-action?source=feed#comment-732075 732075 Tue, 27 Oct 2009 08:59:30 -0400 http://seekingalpha.com/article/165886-ackman-explains-why-he-s-short-reit-realty-income?source=feed#comment-719264 719264 Sun, 18 Oct 2009 09:49:03 -0400 http://seekingalpha.com/article/163434-decline-in-reit-prices-is-likely-to-continue?source=feed#comment-692952 692952

On Sep 26 12:36 PM Anthony Alfidi wrote:

> Forget about the 50-day MA and look at the cap rate instead. Evaluate
> a REIT or ETF like a physical piece of property. Fair value IMHO
> for IYR is somewhere between $20-27 depending on how you calculate
> the yield.]]> Sun, 27 Sep 2009 10:34:37 -0400

On Sep 26 12:36 PM Anthony Alfidi wrote:

> Forget about the 50-day MA and look at the cap rate instead. Evaluate
> a REIT or ETF like a physical piece of property. Fair value IMHO
> for IYR is somewhere between $20-27 depending on how you calculate
> the yield.]]> http://seekingalpha.com/article/163465-could-securitization-of-debt-be-unraveling-on-legal-grounds?source=feed#comment-691863 691863 Sat, 26 Sep 2009 09:42:04 -0400 http://seekingalpha.com/article/162918-real-estate-in-the-midst-of-bull-market?source=feed#comment-687798 687798
XHB looks dangerous to me. The Fed buying up bonds has propped this market up as other readers have pointed out. Not to sound like a broken record, but the supply-demand fundamental on the Res side is a mess. ]]> Wed, 23 Sep 2009 12:45:17 -0400
XHB looks dangerous to me. The Fed buying up bonds has propped this market up as other readers have pointed out. Not to sound like a broken record, but the supply-demand fundamental on the Res side is a mess. ]]> http://seekingalpha.com/article/161171-regency-centers-would-be-lucky-just-to-maintain-present-levels?source=feed#comment-676324 676324 Mon, 14 Sep 2009 15:30:18 -0400 http://seekingalpha.com/article/155823-general-growth-progressing-on-schedule?source=feed#comment-662670 662670

On Sep 03 09:18 PM Brian McMorris wrote:

> REITBull:
>
> I would counter your argument by making the point that as long as
> GGP is in bankruptcy court, the court will supervise the process
> of loan "workouts" and will put pressure on the lenders to get a
> reasonable deal done. That is the entire point of going into Chapter
> 11. Remember, GGP is cash flow positive and very solvent from an
> operational perspective (they reported profits last Q). They don't
> need charity, just fairness.]]> Fri, 04 Sep 2009 20:47:11 -0400

On Sep 03 09:18 PM Brian McMorris wrote:

> REITBull:
>
> I would counter your argument by making the point that as long as
> GGP is in bankruptcy court, the court will supervise the process
> of loan "workouts" and will put pressure on the lenders to get a
> reasonable deal done. That is the entire point of going into Chapter
> 11. Remember, GGP is cash flow positive and very solvent from an
> operational perspective (they reported profits last Q). They don't
> need charity, just fairness.]]> http://seekingalpha.com/article/155823-general-growth-progressing-on-schedule?source=feed#comment-630371 630371 B) could be detrimental to GGPs reorg. An improved credit market would increase the lenders' leverage when negotiating with GGP on modifications. There is a greater likelihood that the loan amount could be recaptured in a foreclosure sale later on down the road if financing loosens up.

When GGP filed, they arguably held all the leverage. Credit markets were frozen and there were no potential acquirers for the properties. A lender's best option at the time was to rework the debt. However, now spreads have come in and Simon Property Group been raising cash at a feverish pace. They now have over $3 billion burning a hole on their balance sheet. A lender could view Simon as a potentially able and willing buyer and choose not to rework the debt. If Simon is interested in some of these properties, and they have stated so in the past, the lender could potentially recapture the loan amount and Simon would acquire Class A, infill properites while potentially weakening a rival. This could wipe out a good chunk of GGPs equity. Just this possibility increases the lender's leverage in negotiations. Again, just playing devil's advocate here. Both yourself and Todd Sullivan have been spot on to date. But I get the feeling that Simon could throw a wrench in GGP's revival. ]]> Fri, 14 Aug 2009 16:56:22 -0400 B) could be detrimental to GGPs reorg. An improved credit market would increase the lenders' leverage when negotiating with GGP on modifications. There is a greater likelihood that the loan amount could be recaptured in a foreclosure sale later on down the road if financing loosens up.

When GGP filed, they arguably held all the leverage. Credit markets were frozen and there were no potential acquirers for the properties. A lender's best option at the time was to rework the debt. However, now spreads have come in and Simon Property Group been raising cash at a feverish pace. They now have over $3 billion burning a hole on their balance sheet. A lender could view Simon as a potentially able and willing buyer and choose not to rework the debt. If Simon is interested in some of these properties, and they have stated so in the past, the lender could potentially recapture the loan amount and Simon would acquire Class A, infill properites while potentially weakening a rival. This could wipe out a good chunk of GGPs equity. Just this possibility increases the lender's leverage in negotiations. Again, just playing devil's advocate here. Both yourself and Todd Sullivan have been spot on to date. But I get the feeling that Simon could throw a wrench in GGP's revival. ]]> http://seekingalpha.com/article/155702-judge-strikes-a-blow-to-spe-game?source=feed#comment-629638 629638

On Aug 14 01:04 AM thurston wrote:

> Hello, thanks to the above for their comments. One thing that comes
> to mind from reading GGP pleadings submitted prior to this decision
> is that the following, "the SPE lenders should have the right to
> foreclose and sell to satisfy the loan", this may be correct but
> the lenders were not complaining that GGP was behind on or not making
> its payments.
>
> Rather, the lender's concern was that some of the SPE's were in fact
> making their payments on principle & interest AND had money left
> over.
>
> GGP want to "sweep" the excess funds (beyond what was needed to make
> loan payments) back to the mother ship (as it were) whereas the lenders
> did not want the SPE's to remain in BK so that this would not happen,
> so that any excess income not needed to make P&I payments on
> the loans would remain segregated in the SPE adding to the security
> of the lender to that particular SPE. Under these circumstances,
> the lenders were not that concerned about their right to foreclose
> on the property in the SPE because there was no reason to foreclose,
> the loan was performing, they just wanted the SPE to not be diluted
> as a result of sending excess funds to the corporate parent.
>
> REITBull wrote:]]> Fri, 14 Aug 2009 09:21:54 -0400

On Aug 14 01:04 AM thurston wrote:

> Hello, thanks to the above for their comments. One thing that comes
> to mind from reading GGP pleadings submitted prior to this decision
> is that the following, "the SPE lenders should have the right to
> foreclose and sell to satisfy the loan", this may be correct but
> the lenders were not complaining that GGP was behind on or not making
> its payments.
>
> Rather, the lender's concern was that some of the SPE's were in fact
> making their payments on principle & interest AND had money left
> over.
>
> GGP want to "sweep" the excess funds (beyond what was needed to make
> loan payments) back to the mother ship (as it were) whereas the lenders
> did not want the SPE's to remain in BK so that this would not happen,
> so that any excess income not needed to make P&I payments on
> the loans would remain segregated in the SPE adding to the security
> of the lender to that particular SPE. Under these circumstances,
> the lenders were not that concerned about their right to foreclose
> on the property in the SPE because there was no reason to foreclose,
> the loan was performing, they just wanted the SPE to not be diluted
> as a result of sending excess funds to the corporate parent.
>
> REITBull wrote:]]> http://seekingalpha.com/article/155702-judge-strikes-a-blow-to-spe-game?source=feed#comment-628847 628847
That is a good point Lew and I don't know what the precedent is. My personal feeling is that the SPE lenders should have the right to foreclose and sell to satisfy the loan if reasonable terms cannot but reached. I would be suprised if the judge allowed them to be crammed down to satisfy other creditors outside of the SPE, but again I don't know what the precedent is here. Judging by his statement, he was not ruling on that issue at this point. The lenders could ultimately choose to modify the loans which may benefit both GGP and the lenders if it is determined that the property could not be sold for a reasonable price in foreclosure. But you are correct, the ruling only addressed the motion to dismiss made by the SPE's. The only way they could have been excluded is if GGP was found to have acted in bad faith. ]]> Thu, 13 Aug 2009 17:20:43 -0400
That is a good point Lew and I don't know what the precedent is. My personal feeling is that the SPE lenders should have the right to foreclose and sell to satisfy the loan if reasonable terms cannot but reached. I would be suprised if the judge allowed them to be crammed down to satisfy other creditors outside of the SPE, but again I don't know what the precedent is here. Judging by his statement, he was not ruling on that issue at this point. The lenders could ultimately choose to modify the loans which may benefit both GGP and the lenders if it is determined that the property could not be sold for a reasonable price in foreclosure. But you are correct, the ruling only addressed the motion to dismiss made by the SPE's. The only way they could have been excluded is if GGP was found to have acted in bad faith. ]]> http://seekingalpha.com/article/155702-judge-strikes-a-blow-to-spe-game?source=feed#comment-628739 628739 Opinion implies that the assets and liabilities of any of the Subject Debtors could properly be substantively consolidated with those of any other entity." The ruling, while not ideal for the SPE lenders, does not appear to adversely effect their lien positions. ]]> Thu, 13 Aug 2009 15:57:05 -0400 Opinion implies that the assets and liabilities of any of the Subject Debtors could properly be substantively consolidated with those of any other entity." The ruling, while not ideal for the SPE lenders, does not appear to adversely effect their lien positions. ]]> http://seekingalpha.com/article/155702-judge-strikes-a-blow-to-spe-game?source=feed#comment-628111 628111

On Aug 13 09:49 AM Lew Richards wrote:

> Again, I would have to disagree with the author. That the lenders
> relied on the integrity of the structure is definitely relevant.
> Previously, a lender would have instituted other protections in their
> pursuit of balancing their risks...whether that be recourse, guarantees,
> or whatever. In these cases, the borrowers agreed to trade the protections
> the SPE's were to provide so as not to allow the lenders to access
> their other assets. The SPE's not only protected the lenders from
> the issues of the parent, they also would prevent the lenders from
> going after other assets of the borrowers should the project fail
> and the SPE default on their loan. This seems like a fair trade to
> me and nothing at all devious. The Judge in this case chose to ignore
> the basis of the transaction in order to favor the borrower...and,
> by extension, the other creditors of the borrower.]]> Thu, 13 Aug 2009 10:16:16 -0400

On Aug 13 09:49 AM Lew Richards wrote:

> Again, I would have to disagree with the author. That the lenders
> relied on the integrity of the structure is definitely relevant.
> Previously, a lender would have instituted other protections in their
> pursuit of balancing their risks...whether that be recourse, guarantees,
> or whatever. In these cases, the borrowers agreed to trade the protections
> the SPE's were to provide so as not to allow the lenders to access
> their other assets. The SPE's not only protected the lenders from
> the issues of the parent, they also would prevent the lenders from
> going after other assets of the borrowers should the project fail
> and the SPE default on their loan. This seems like a fair trade to
> me and nothing at all devious. The Judge in this case chose to ignore
> the basis of the transaction in order to favor the borrower...and,
> by extension, the other creditors of the borrower.]]> http://seekingalpha.com/article/155702-judge-strikes-a-blow-to-spe-game?source=feed#comment-628104 628104
I would have to agree with the first two posters on this. I do not agree, in this case, that the entire purpose of the SPE was to set up a fiction. The SPE is used to secure the lender's right to the property it is lending against. In turn, it limits GGP's exposure if they were to default on debt service. Had GGP defaulted on a loan, the lenders would only have a right to the property in the SPE and could not go after GGP's other assets. The SPE was suppose to protect both parties. I do agree that seperate funding paths should have been used and is probably what hurt the lender's argument in this case (I haven't read the ruling yet). But I do not think it should have been enough to overrule the loan covenants. Had the tables been turned and GGP walked away from a property, do you think the judge would have allowed the secured lenders to go after GGPs other assets? ]]> Thu, 13 Aug 2009 10:10:22 -0400
I would have to agree with the first two posters on this. I do not agree, in this case, that the entire purpose of the SPE was to set up a fiction. The SPE is used to secure the lender's right to the property it is lending against. In turn, it limits GGP's exposure if they were to default on debt service. Had GGP defaulted on a loan, the lenders would only have a right to the property in the SPE and could not go after GGP's other assets. The SPE was suppose to protect both parties. I do agree that seperate funding paths should have been used and is probably what hurt the lender's argument in this case (I haven't read the ruling yet). But I do not think it should have been enough to overrule the loan covenants. Had the tables been turned and GGP walked away from a property, do you think the judge would have allowed the secured lenders to go after GGPs other assets? ]]> http://seekingalpha.com/article/153248-commercial-real-estate-make-up-your-own-mind?source=feed#comment-614316 614316
User,

I have to disagree with you on this. At the end of Q1 only 21.4% of CRE loans were securitized (MBA). New loans are getting done at 60% LTV for class A, infill markets. I wouldn't take Sam Zell's comments at face value either. Remember that he called a bottom in Residential real estate in Spring 2008.


On Aug 03 09:09 PM User 465743 wrote:

> Good article. But you are missing something. The lending at 60% is
> a fantasy. If you have a Class A office building in a major city,
> you may be 50%. If you have a hotel, a strip mall, a big box retail
> center, an asset located in a small town, etc, forget it. There is
> no financing. The banks are not lending the money that the Feds gave
> them. The only money available, really is money for apartments from
> HUD, Fannie Mae or Freddie Mac. Securitization expanded the credit
> markets so that assets that previously did not get financed were
> financed. Almost 60% of the loans out there, at least, were securitized
> in nature. So, maybe TALF will work, but I don't see the same focus
> on the dangers as I did when AIG was going bust. They focused on
> housing first, because it is politically correct. But they are missing
> the boat on commercial in terms of urgency and this will bring on
> a double dip. Commercial real estate doesn't work without debt. And
> the banks are not helping and the Feds are not helping. If there
> is no debt, there is no market and values are suspect. The jobs multiplier
> for commercial real estate is huge. Big players are taking advantage
> of low Libor rates and sitting on assets. Debt service is being paid
> but their values are in the tank. Zell is right. Eventually assets
> have to be refinanced and it will be a bloodbath. Write your Congressman,
> because they aren't focused on this and are clueless.]]> Tue, 04 Aug 2009 09:20:19 -0400
User,

I have to disagree with you on this. At the end of Q1 only 21.4% of CRE loans were securitized (MBA). New loans are getting done at 60% LTV for class A, infill markets. I wouldn't take Sam Zell's comments at face value either. Remember that he called a bottom in Residential real estate in Spring 2008.


On Aug 03 09:09 PM User 465743 wrote:

> Good article. But you are missing something. The lending at 60% is
> a fantasy. If you have a Class A office building in a major city,
> you may be 50%. If you have a hotel, a strip mall, a big box retail
> center, an asset located in a small town, etc, forget it. There is
> no financing. The banks are not lending the money that the Feds gave
> them. The only money available, really is money for apartments from
> HUD, Fannie Mae or Freddie Mac. Securitization expanded the credit
> markets so that assets that previously did not get financed were
> financed. Almost 60% of the loans out there, at least, were securitized
> in nature. So, maybe TALF will work, but I don't see the same focus
> on the dangers as I did when AIG was going bust. They focused on
> housing first, because it is politically correct. But they are missing
> the boat on commercial in terms of urgency and this will bring on
> a double dip. Commercial real estate doesn't work without debt. And
> the banks are not helping and the Feds are not helping. If there
> is no debt, there is no market and values are suspect. The jobs multiplier
> for commercial real estate is huge. Big players are taking advantage
> of low Libor rates and sitting on assets. Debt service is being paid
> but their values are in the tank. Zell is right. Eventually assets
> have to be refinanced and it will be a bloodbath. Write your Congressman,
> because they aren't focused on this and are clueless.]]> http://seekingalpha.com/article/152007-general-growth-6-month-extension-is-a-big-achievement?source=feed#comment-608178 608178
I think this is a very intellectual argument and you support your case well. Also, since you do this for a living, you probably have a leg up on me. However, I would like to raise a few points to think about. The scenario with the $10M property will play out. I believe it will be more common with private landlords with B and C class properties than it will be with publicly traded REITs. A company like Simon has enough unemcumbered properties that they could take a mortgage out on one property to fill the equity gap on another that needs to be refinanced. They could also sell notes, tap their credit facility, or issue additional shares. They have had considerable success doing this in one of the worst credit contractions in history. In addition, they can accerlate amortorization on properties they consider to be troublesome by making additional payments on principal.

The formerly $10 million dollar property dropping to $6 million with a 9% cap rate would in all likelihood be valued at or below replacement cost (this is just a gut feeling and I really have no way of supporting this). In my opinion, properties cannot trade at or below replacement cost for an extended period of time. You may have a period of time where this does occur, but I do not believe it will carry out 3 years into 2013. Also, origination LTV's on anchored retail average around 65%. Some LTVs were higher, but overall they were a smaller %.

I think investors should be careful not to use current statistics and carry them out for years to come (i.e. current LTVs, property values, consumer spending habits, etc). The scenario above is really no different than an investor in 2007 who said current LTVs will continue to be 70%, consumer spending will continue to grow at 3% and therefore I will get x% return on my retail CRE investment. Instead I think investors should look at what factors could change these scenarios and what is the likelihood that they will change. To me, credit conditions cannot continue to remain this tight for 3 years. Markets tend to overcorrect. The pendulum never swings to the middle.

I agree with you on Sam Zell. He has been more successful than I probably ever will be, but he has made some big mistakes as well. If my memory serves me correctly, he called a bottom in Residential RE in Spring 2008.

]]> Thu, 30 Jul 2009 12:04:49 -0400
I think this is a very intellectual argument and you support your case well. Also, since you do this for a living, you probably have a leg up on me. However, I would like to raise a few points to think about. The scenario with the $10M property will play out. I believe it will be more common with private landlords with B and C class properties than it will be with publicly traded REITs. A company like Simon has enough unemcumbered properties that they could take a mortgage out on one property to fill the equity gap on another that needs to be refinanced. They could also sell notes, tap their credit facility, or issue additional shares. They have had considerable success doing this in one of the worst credit contractions in history. In addition, they can accerlate amortorization on properties they consider to be troublesome by making additional payments on principal.

The formerly $10 million dollar property dropping to $6 million with a 9% cap rate would in all likelihood be valued at or below replacement cost (this is just a gut feeling and I really have no way of supporting this). In my opinion, properties cannot trade at or below replacement cost for an extended period of time. You may have a period of time where this does occur, but I do not believe it will carry out 3 years into 2013. Also, origination LTV's on anchored retail average around 65%. Some LTVs were higher, but overall they were a smaller %.

I think investors should be careful not to use current statistics and carry them out for years to come (i.e. current LTVs, property values, consumer spending habits, etc). The scenario above is really no different than an investor in 2007 who said current LTVs will continue to be 70%, consumer spending will continue to grow at 3% and therefore I will get x% return on my retail CRE investment. Instead I think investors should look at what factors could change these scenarios and what is the likelihood that they will change. To me, credit conditions cannot continue to remain this tight for 3 years. Markets tend to overcorrect. The pendulum never swings to the middle.

I agree with you on Sam Zell. He has been more successful than I probably ever will be, but he has made some big mistakes as well. If my memory serves me correctly, he called a bottom in Residential RE in Spring 2008.

]]> http://seekingalpha.com/article/152007-general-growth-6-month-extension-is-a-big-achievement?source=feed#comment-607227 607227


On Jul 29 04:03 PM 6 Moves Ahead wrote:

> Moonfly, I believe you are wrong. An extension in this case provides
> GGP with enormous leverage. GGP exhibits more assets than liabilities,
> and its properties are performing. GGP was a victim of the credit
> freeze, and simply wasn't able to refinance its properties when the
> market fell off a cliff. If you're a GGP creditor, the thought of
> not realizing debt service on a loan for upwards of 12 months doesn't
> work in this environment. If you're a lender, you need your money
> to work for you - not sit at the center of a bankruptcy costing you
> millions. It's cut and dry that the creditors in this case could
> benefit enormously if they simply negotiate new financing terms.
> Obviously, this works for everyone. GGP exits bancruptcy quicker,
> and the lenders are back on their feet with a performing property
> in their portfolio. And, if you think that this type of trouble is
> exclusive to GGP during this downturn - think again. When 2004, '05,
> and '06 loans on substantially inflated values mature in '11, '12,
> and '13, most landlords simply won't have enough cash to refinance
> the deal - particulalry with sinking loan to value ratios designed
> to protect lenders. Owners will be required to take on partners or
> swap equity to simply keep from losing their property. Meanwhile,
> GGP will have long since exited bankruptcy with very favorable financing
> terms, and its progress to becoming a successful company won't be
> impeaded. All I can say is that the market should expect to see similar
> refinance scenarios unfold with other large owners in the coming
> years. It simply cannot be avoided. Watch out Simon Property Group,
> et al.]]> Wed, 29 Jul 2009 17:26:42 -0400


On Jul 29 04:03 PM 6 Moves Ahead wrote:

> Moonfly, I believe you are wrong. An extension in this case provides
> GGP with enormous leverage. GGP exhibits more assets than liabilities,
> and its properties are performing. GGP was a victim of the credit
> freeze, and simply wasn't able to refinance its properties when the
> market fell off a cliff. If you're a GGP creditor, the thought of
> not realizing debt service on a loan for upwards of 12 months doesn't
> work in this environment. If you're a lender, you need your money
> to work for you - not sit at the center of a bankruptcy costing you
> millions. It's cut and dry that the creditors in this case could
> benefit enormously if they simply negotiate new financing terms.
> Obviously, this works for everyone. GGP exits bancruptcy quicker,
> and the lenders are back on their feet with a performing property
> in their portfolio. And, if you think that this type of trouble is
> exclusive to GGP during this downturn - think again. When 2004, '05,
> and '06 loans on substantially inflated values mature in '11, '12,
> and '13, most landlords simply won't have enough cash to refinance
> the deal - particulalry with sinking loan to value ratios designed
> to protect lenders. Owners will be required to take on partners or
> swap equity to simply keep from losing their property. Meanwhile,
> GGP will have long since exited bankruptcy with very favorable financing
> terms, and its progress to becoming a successful company won't be
> impeaded. All I can say is that the market should expect to see similar
> refinance scenarios unfold with other large owners in the coming
> years. It simply cannot be avoided. Watch out Simon Property Group,
> et al.]]> http://seekingalpha.com/article/151636-banks-kick-commercial-real-estate-loans-down-the-road?source=feed#comment-605597 605597

On Jul 28 03:02 PM Karen Consumer wrote:

> The experts who don't see a problem with the banks 'playing kick
> the can' with these commercial properties must never leave their
> offices. Irving Mall (Irving, Texas) is a Simon property. The people
> who venture to the mall know it's on its last legs, we can tell by
> the condition of the mall and the quality of the stores (that are
> left). The corner of Story and Irving Blvd; up and down Roy Orr/Valley
> View, the "For Lease/Build to Suit" signs up and down every major
> thoroughfare, these tell the truth to the rest of us.
>
> Artificially padding the books (which is how I see it when they refuse
> to take the loss) at the banks will help them this year, and maybe
> next, but they will eventually have to take the loss, and when they
> fall, they will drag us over the edge with them. God help us all.]]> Tue, 28 Jul 2009 16:35:03 -0400

On Jul 28 03:02 PM Karen Consumer wrote:

> The experts who don't see a problem with the banks 'playing kick
> the can' with these commercial properties must never leave their
> offices. Irving Mall (Irving, Texas) is a Simon property. The people
> who venture to the mall know it's on its last legs, we can tell by
> the condition of the mall and the quality of the stores (that are
> left). The corner of Story and Irving Blvd; up and down Roy Orr/Valley
> View, the "For Lease/Build to Suit" signs up and down every major
> thoroughfare, these tell the truth to the rest of us.
>
> Artificially padding the books (which is how I see it when they refuse
> to take the loss) at the banks will help them this year, and maybe
> next, but they will eventually have to take the loss, and when they
> fall, they will drag us over the edge with them. God help us all.]]> http://seekingalpha.com/article/151636-banks-kick-commercial-real-estate-loans-down-the-road?source=feed#comment-604858 604858

On Jul 27 07:05 PM TraderMark wrote:

> Is it only performing loans? It sure doesnt sound like it. How are
> foreclosed loans as a % of nonaccruals at its lowest point in 3 years?
>
>
> Good hearted nature by banks all the sudden? Hmmm...]]> Tue, 28 Jul 2009 09:33:39 -0400

On Jul 27 07:05 PM TraderMark wrote:

> Is it only performing loans? It sure doesnt sound like it. How are
> foreclosed loans as a % of nonaccruals at its lowest point in 3 years?
>
>
> Good hearted nature by banks all the sudden? Hmmm...]]> http://seekingalpha.com/article/151636-banks-kick-commercial-real-estate-loans-down-the-road?source=feed#comment-604786 604786
1. This certainly could happen. However, I think banks will be in a better position to handle foreclosures 3-5 years from now. Also, my belief is that the credit markets will improve from where they are now.

2. I would not assume that all currently performing loans continue to perform a year from now. But what is the alternative for the bank? Continue collecting interest payments until the borrower defaults via an extenstion, or foreclose now and take a huge hit to the balance sheet? If I were the bank I would choose the former. It just makes more sense.

3. I would not assume this is the bottom nor would I make any predictions about one. However, many reports put CRE value declines at 35-40% since 2007. I find it hard to believe that this rate of decline will continue, although further declines are likely in the short term. Also, I should point out that I am more focused on REITs than private CRE. REITs have an advantage by being able access the public markets which they have done successfully in recent months. They can also take free cash flow from one property and use it to pay down principal on another property that may be coming up for refinancing.




On Jul 27 05:55 PM CoinAphrase wrote:

> You make assumptions that would have been easy in past years, but
> that I can't automatically accept today. Consider,
> 1. What if payments on principle are more than offset by further
> declines in current market prices?
> 2. Would you assume that all currently performing loans continue
> to be performing a year from now?
> 3. Do you assume this is the bottom, and that they will therefore
> be able to dig themselves out from here on?
> ]]> Tue, 28 Jul 2009 08:56:46 -0400
1. This certainly could happen. However, I think banks will be in a better position to handle foreclosures 3-5 years from now. Also, my belief is that the credit markets will improve from where they are now.

2. I would not assume that all currently performing loans continue to perform a year from now. But what is the alternative for the bank? Continue collecting interest payments until the borrower defaults via an extenstion, or foreclose now and take a huge hit to the balance sheet? If I were the bank I would choose the former. It just makes more sense.

3. I would not assume this is the bottom nor would I make any predictions about one. However, many reports put CRE value declines at 35-40% since 2007. I find it hard to believe that this rate of decline will continue, although further declines are likely in the short term. Also, I should point out that I am more focused on REITs than private CRE. REITs have an advantage by being able access the public markets which they have done successfully in recent months. They can also take free cash flow from one property and use it to pay down principal on another property that may be coming up for refinancing.




On Jul 27 05:55 PM CoinAphrase wrote:

> You make assumptions that would have been easy in past years, but
> that I can't automatically accept today. Consider,
> 1. What if payments on principle are more than offset by further
> declines in current market prices?
> 2. Would you assume that all currently performing loans continue
> to be performing a year from now?
> 3. Do you assume this is the bottom, and that they will therefore
> be able to dig themselves out from here on?
> ]]> http://seekingalpha.com/article/151636-banks-kick-commercial-real-estate-loans-down-the-road?source=feed#comment-604177 604177 Mon, 27 Jul 2009 17:16:26 -0400 http://seekingalpha.com/article/150750-michelle-caruso-cabrera-charlie-gasparino-bash-finance-blogs?source=feed#comment-601315 601315 Fri, 24 Jul 2009 15:52:59 -0400 http://seekingalpha.com/article/148731-a-novel-solution-to-the-commercial-real-estate-problem?source=feed#comment-587700 587700 Tue, 14 Jul 2009 13:05:49 -0400 http://seekingalpha.com/article/148442-mortgages-option-arms-are-the-new-subprimes?source=feed#comment-586410 586410 Mon, 13 Jul 2009 16:43:55 -0400 http://seekingalpha.com/article/147724-vultures-circling-commercial-real-estate-may-be-a-good-sign?source=feed#comment-580879 580879 Thu, 09 Jul 2009 13:14:46 -0400