Commercial Real Estate Finance

Posts Tagged ‘bonds’

It was hard to follow the news in the past few weeks without hearing something about the desperate financial situation that Greece has fallen into.  The European Union intensely debated the issue of whether or not the nation should be “bailed out” in some fashion and if so, what form that economic stimulus package should take.  This past weekend, the EU finance ministry finalized a €30 billion aid-package to the nation struggling to meet its sovereign debt obligations.  After receiving the aid package Greece issued about €2 billion in short-term debt, and guess what…it was received with open arms.  Case in point: borrowers that have a shaky future can still get a loan if their balance sheet is beefy enough.  Sure, this is an example of sovereign debt, but the same theory applies in commercial real estate.

Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

You Snooze, You Lose

If the corporate bond market is any indication of what is to come for real estate debt, it’s clear that non-bank lenders will make an attractive risk adjusted yield this cycle.  The window for putting that money out, however, could be short-lived.  Many in the corporate bond market feel that both extremely high yield and extremely good credit bonds are overpriced.  Since the end of 2008, corporate bonds at both ends of the credit rating spectrum have made a huge rally.  It’s the better quality credit junk bonds (the bonds in the middle of the credit spectrum) that look attractive still.  These bonds still have a decent yield for their default risk.

Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

Bloomberg published an informative article yesterday highlighting the reasons why debt financing is so much more expensive for governments than private companies.  You would think that governments that NEVER default on debt issuances and have unlimited tax revenue could issue debt at a cheaper cost than private companies.  Municipal bonds, however, are often issued at rates anywhere from 100 to 150 bps higher than private companies.  What’s the reason for this?  Moreover, what lessons can an owner/investor of commercial real estate learn about debt financing from the municipal bond market?

Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

Llenrock principal and former trader, Dave Weinstein, offers his thoughts regarding recent news about Wall Street’s latest attempt at fleecing the public.

Fed Could Sell Options to Ease Rate Swings, Credit Suisse Says

Assume for a second, you don’t know anything about option pricing.  Then ask yourself, “If I had to make a bet, would I bet that the world is going to become a more volatile place or a less volatile place?”

Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

There was a recent article on Bloomberg.com entitled “Bond Dealers Say Futures Traders’ Rate Bets Wrong“

Well, if the broker/dealers say that the market is wrong, then the markets must be wrong!  Right?  WRONG!

Without getting into a debate on efficient market theory, I think we can point out how silly this argument is.  Let us start by considering the source.  These i-banks, along with ratings agencies, simply cannot be trusted to accurately predict moves in the market.  Even if they did not have constituencies to consider (large companies, local governments, foreign governments, the US federal government…etc.), why should we take their prognostications as being useful?  After all, their track record is less than stellar.  What were these institutions telling us (or worse, selling us) in 2006 and 2007?  “All is well!  Can I interest you in these AA rated synthetic CDO tranches?”  No, thanks.

Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!

In Europe, advisers  say chief financial officers from London to Lisbon have been comparing the costs of raising finance through issuing new shares, bonds or by turning their own property into cash.

With stock prices down, share issuance is expensive because investors, fearing stocks could keep falling, are demanding hefty discounts.

Bonds are costly because yield premiums over government paper have widened over the past year, and investors are shying away from corporate debt from all but the highest investment-grade issuers. Banks that used to issue mortgages with just 20% equity are now demanding as much 45%.
Read the rest of this entry »

If you enjoyed this post, make sure you subscribe to my RSS feed!