Real Insight. Real Estate.

Archive for September, 2009

It turns out not every Canadian is a dim-witted Dudley Do-Right riding backwards on his horse.  In fact, the Canadian’s have proved they know what they’re doing when it comes to running large, private banks.  In a time when the largest U.S. banks are suffering from rapid deterioration of market value, Canadian banks are actually improving their market cap without having to engage in dilutive capital raises.  There’s no doubt that RBC, TD, Bank of Nova Scotia, Bank of Montreal, and CIBC (the 5 largest Canadian banks) have weathered the economic downturn far better than their U.S. counterparts.  In many instances Canadian markets move in step with U.S. markets, so what could be the reason for the relatively strong health of our banking neighbors to the north?

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Caveat Emptor!

As this recent article in the WSJ articulated, the recent run-up in stocks has given some hope to the commercial real estate market. What’s interesting is that many of the enterprises are players who typically enjoy prospering as private shops. Perhaps the warm reception Starwood received earlier this year encouraged them.

Like with the rash of private-shop-turned-public IPO’s announced in early 2007 (Fortress, Sam Zell, BlackRock…etc), I can’t help but feel a little nervous. While Zell actually sold his public company, the point remains the same. I’m not so sure I want to be buying what these guys are selling. Why? Read the rest of this entry »

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We are all familiar with the risk proposition that life insurance offers.  Do I pay money now to ensure a secure future for my family in the future should something happen to me?  Or, do I invest and/or save that same amount of money, hoping I live long enough that it grows into a nice security blanket for my family before I go, saving the sunk cost of life insurance premiums in the process?  It essentially is a Catch-22 because without knowing the future, you cannot possibly know you are making the right decision.  It is a crap shoot.

One thing is certain however.  With the economy in the tank, society as a whole tends to think more in the here and now when it comes to costs than they do the future.  That means that there are significantly fewer people ordering life insurance policies in the past 12 months that in years past. That makes sense of course.  But we are ignoring another huge reason people are thwarting life insurance.  Premiums have been skyrocketing.  Why?  Commercial real estate…that’s why! Read the rest of this entry »

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FDIC to Borrow From Banks?

In a post several weeks ago, Llenrock’s Rishy Mehrotra questioned where the shortfall of FDIC funds would inevitably come from.  In an ironic twist of fate, could the FDIC opt to borrow from the very banks it is meant to ensure deposits for?  Check out this video:

Are Commercial Real Estate Values a Good Buy?

Is this Brit a genius contrarian out of the Noriel Roubini mold? Or is the following just self-serving propaganda?  You be the judge:

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The Week of September 19-25

- Will Britain’s commercial real estate sector be in negative equity until 2017?

- How bad are hotels?  Blackstone just sold one for less than it cost in 1998.

- Fitch ratings has downgraded one CMBS special servicer, while upgrading another.

- From the horses mouth: Tishman calls CRE mess “staggering”

- Will it cost more to stay alive? Life Companies have raised rates to cover CRE losses.

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In a piece originally titled “10 Bubbles in the Making,” Lawrence Delevingne, a writer for The Business Insider examines 10 current economic phenomena that he thinks are poised for fallout in coming years.  While there are probably other less obvious economic issues waiting to burst, Lawrence has done a good job of picking out some main-stream topics that have gotten a lot of press of late.  We thought we’d take a moment to offer our 2 cents in response to Lawrence’s ideas considering we have blogged on several of these topics in the last couple of months.

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Lawrence Bizjak is a Managing Director and co-head of real estate at Garrison Investment Group, where he oversees a team responsible for the origination, acquisition and execution of real estate investments at all levels of the capital structure. Garrison’s is an active originator and a buyer of performing, sub-performing and non-performing mortgages, B-notes and mezzanine debt. The firm invests nationwide in all property types.

During his 20 year career, Mr. Bizjak has held positions at Gramercy Capital Corp. (NYSE:GKK), Goldman Sachs & Co, and E&Y Kenneth Leventhal. Mr. Bizjak graduated from Cornell University with a B.S. in Urban Design and is a CFA charterholder.

Garrison Investment Group makes credit and asset-based investments with attractive risk adjusted returns. Their experienced team of 35 professionals enables their investment group to source and execute transactions across corporate, real estate, and financial assets. Garrison  Investment Group invests predominantly in loans, securities and asset purchases, and are actively making investments in the current market environment.

Q: As a company, tell me about the niche you have carved out for yourself and how you feel you are different from the competition. Why do you find this product type more appealing than alternative real estate asset classes?

A: Garrison has three areas of focus – commercial real estate, corporate finance, and financial/consumer assets. We are able to invest in Read the rest of this entry »

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For the last couple of years only one country has dominated every conversation about the next emerging economic and political superpower: China.  The country’s mercantilist policies have been the center of heated debate and controversy and have placed China at center stage of a global economic revolution.  Through strict and methodical monetary and foreign trade policy, China has dramatically increased its influence over foreign economies, most notably the U.S. economy.  The latest development in China’s ever increasing impact on the U.S. economy is the nation’s endeavor to invest in U.S. CMBS.  Could this be the long-awaited answer to catalyzing movement in CRE capital markets?

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Everyone knows that asset values are falling in most, if not all, markets. But how can you measure the rate of descent for that falling knife?

“No one knows what loan-to- value [LTV] is because there are no sales comps,” says Will Baker, a vice president at Bethesda, Md.-based Walker and Dunlop. “The appraisers are pulling their hair out, trying to figure out what a cap rate is.”

In the past, lenders could turn to the acquisition market to get a current read on valuations. But since there are very few acquisitions this year, lenders have nothing to measure against: In the absence of a trade, there’s no market-determined value. But even if there was a recent transaction in a local market, it may not really be comparable. Today’s cap rates just can’t be trusted. “You have to really dive into cap rates and see why the sale happened,” Baker says. “Was it a distressed sale? Did they have to sell? Or was this a normal deal? You can’t just look at a cap rate anymore.” Read the rest of this entry »

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For years, tenant representation firms like Studley argued during their pitches to clients that by representing tenants and tenants only, they truly had their clients’ best interests at heart…there was no conflict of interests.  National giant firms like CBRE, Grubb & Ellis, and Cushman & Wakefield, who often represented both landlords and tenants, would always make the counterpoint that because they represented so many landlords, their data was better, and therefore they could provide their tenant clients with the most accurate and up to date information in the marketplace, and therefore provide the best deals in the marketplace.  This is a psychological battle that continues today, with no clear winner.  The victor usually is the one who can convince the client that their line of thinking is the logical one. Read the rest of this entry »

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