Commercial Real Estate Finance

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After reading an article in Bloomberg delineating why hotel investors are flocking to Europe I came to the conclusion that being a hotel owner in this “land of opportunity” seems to be less of a blessing and more of a curse these days.  Higher development rates have helped deteriorate property values in the US compared to Europe, which means more real estate investors are looking to plant their money across the Atlantic this year and for the foreseeable future. Read the rest of this entry »

Part platitude, part mindless blather, I’m sorry to break out the following trading-floor ‘truism’: “Correlations hold until they don’t.” It’s a sloppy, shorthand way to reminding yourself about the dangers of being complacent. Much of this on-going crisis is the result of complacency developed over years of seemingly inexorable asset appreciation. Market players, regulators, legislators and ratings agencies all were frogs in a pot of water, slowly coming to a boil.

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Earlier this year President Obama and his team of economic advisors announced the President’s intention to propose a “Financial Crisis Responsibility Fee” to recover TARP funds.  Essentially, this would be a fee levied on large financial institutions ($50 billion or more in assets) proportionate to the amount of leverage on the banks’ balance sheets.  Yesterday, the International Monetary Fund (IMF) released a report detailing their opinion of the measure.  Obviously, levying a surcharge based on a bank’s leverage is not an accurate way of divvying-up the “responsibility” for the financial crisis.  I was surprised, however, to learn that rather than pointing out why such a surcharge is ludicrous altogether, the IMF simply stated yesterday that the method of attributing “responsibility” is flawed. 

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The New York State Supreme Court Appellate Division ruled last Friday that Citigroup must maintain the “status quo” of the Destiny USA New York shopping mall project.  Basically, that means that Citigroup will not yet be allowed to cease lending to the construction of the mall being built by developer Robert Congel.  While it is still possible for Citi to get out of the remainder of the loan commitment (the lower court still has to have a trial on the “success” of the project), the ruling sets a precedent that will make it increasingly more difficult for lenders to renege on their construction financing commitments.
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