Commercial Real Estate Finance

Archive for the ‘Politics/Government Programs’ Category

Ra, the ancient Egyptian Sun God, would certainly frown on this moment in Egyptian history….that is if his rays could penetrate the Cairo smog. Due to a combination of congestion, crowding and pollution, the Egyptian government has decided to accommodate is burgeoning population by building two entirely new cities in the desert suburbs, from scratch. Read the rest of this entry »

As a follow-up to my piece last week regarding the impending political season, I want to refine my position regarding Tea Party Impact. I’ll start by reiterating that the “Tea Party”, at this point, is not a cohesive entity. A google search for Tea Party yielded over 65 million results, including the following web sites:

http://www.teapartypatriots.org/

https://www.jointheteaparty.us/

http://www.teaparty.org/

http://teapartypatriots.ning.com/

Anyone who can find a consistent economic message (other than the generic “stop spending”), let alone a plank regarding commercial real estate, please write in and let me know.

What is clear, however, is a shift to the right in the republican center of gravity. I’m accounting for the typical republican playbook - run right during the primary, tack back for the general - and proposing the Dems might do better than expected.

In the recent primaries, the Tea Party showed strength. This means republicans will now have to guard their right flank throughout the entire cycle. This will leave the center open if the democrats can pull it together and cease the opportunity. Needless to say, we’ve see this sort of thing before i.e. Buchanan/Clinton and Nader/Bush (Perot is not included because he was not so clearly to the right of Bush). In 2010, there is an interesting dynamic regarding the economy, the government and markets.

Going forward, the worse the economy gets the worse things get for Obama/Dems, right? Well, there will also be more pressure for the government to “do something”. The more the feds “do” the stronger the Tea Party becomes. This draws the republicans further to the right, leaving more room for Obama to move right and take the middle.

Where can the Dems move right? Immigration: think Nixon going to China. For instance, McCain moved way right in Arizona to keep the republican bid, leaving Obama with the ability to force concessions from congressional Dems. I have to believe it will lead to both a beefed up border AND an easier legal immigration. The net here would be a boost to corporate rental operations and companies that focus on starter homes.

Feel like taking an early bet? Try Equity Residential (NYSE: EQR) for the rental exposure and PoulteGroup, Inc. (NYSE: PHM) for the starter homes.

In a recent CNN Money article, the author hoots and hollers about the next big real estate rip-off: home resale fees.  The fee, which essentially stipulates that as a housing development is being developed, the developer writes into all home purchase contracts that they are to receive a 1% resale fee every time that home is sold in the future for up to 99 years.  The article claims that this is such a rip-off, compares into to nothing more than price gouging, and says it has absolutely no value to consumers.  Hence, it has politicians and consumer advocates’ attention.  But are these groups really all that informed? Read the rest of this entry »

Don't confuse "Bullet Trains" with "Silver Bullet" Trains.

If you don’t know what a bullet train is, this scene from “Mission:Impossible” should give you a pretty good idea of its speed. And according to this article from CNN, bullet trains might finally be coming to the United States. The Department of Transportation awarded $8 billion among 31 states to begin developing America’s first nationwide high-speed intercity passenger rail service. Read the rest of this entry »

Traditionally, August is a dead month for commercial real estate. I understand some of you may be checking from a favorite vacation spot, so we can take the opportunity to broaden the scope of our discussion.

While perhaps not top of mind yet, once Labor Day arrives, election season will be upon us. The 2010 mid-term elections are important in their own right and for setting the tone for the presidential cycle in 2012. Freddie and Fannie alone are enough to make government policy important, and that’s just the beginning. Read the rest of this entry »

With BP Plc (BP: US) now allocating $20 billion for lost business in states bordering the Gulf Realtors are out looking for their piece of the pie.  In Washington Kenneth Feinberg, head of BP’s $20 billion claims fund, met with the National Association of Realtors and industry representatives from Texas, Louisiana, Mississippi, Alabama and Florida to discuss their request for reparations.  In this case Feinberg will have to scrutinize claims for lost sales and determine what losses are due to the general angst of the housing market and what losses can be attributed to the spill itself. Read the rest of this entry »

How shall I put this delicately? I have heard that sometimes, when the owner of an asset hires an expert to evaluate said asset, a potential conflict of interest can arise. The expert evaluator might, possibly be tempted to inflate the value of the asset to satisfy it’s client. I could even imagine a more aggressive owner putting a little pressure on the “expert” to inflate the value of the subject asset. While I’m not suggesting any specific person or company has ever done this, we should always be cognizant of where incentives lie. Read the rest of this entry »

Ever since Pacific Investment Management Co. (PIMCO) assessed the insurance industry’s home-loan investments, insurance regulators have been looking for a firm to review Commercial Mortgage Backed Securities (CMBS).  Analysis of CMBS investments will help determine how much capital insurers must set aside to circumvent any losses at the expense of the consumers. Read the rest of this entry »

While many people are questioning the Federal Deposit Insurance Corporation’s (FDIC) strategy for managing assets seized from failed banks, we must look to the 1980’s Savings and Loan Crisis to see the reasoning behind their “risky business”.  In 1989 the Resolution Trust Corporation (RTC) was an asset management company established by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), and charged with the liquidation of insolvent assets belonging to failed banks.  These assets were primarily real estate-related assets, and between 1989 and 1995 the RTC closed or resolved 747 thrifts with total assets of $394 billion. Read the rest of this entry »

I was reading an article a couple of weeks ago on The Real Deal Online about resident advocates in NYC requesting that the City’s housing authority begin investigating the financials of multi-family properties.  Basically, advocates of tenants in apartment buildings are contesting that overleveraged properties are more likely to fall into dilapidation because the landlord’s cash flow goes entirely to servicing debt, leaving no money for maintenance and repairs.  To prevent the building from incurring housing code violations, the resident advocates are saying that the housing authority should force the sale of overleveraged assets at a price that makes it easier for the new owner to service his debt and have money left over to upkeep the building.  I feel for residents who live in buildings with crappy landlords, but prying into the financials of a building is downright ridiculous.

Read the rest of this entry »