Real Insight. Real Estate.

Posts Tagged ‘CMBS’

In her latest blog entry, a woman named Megan McArdle took a brave stance!  She said that Tishman and Blackrock’s collective decision to buy Stuyvesant Town for $5.4 Billion was a “…breathtakingly stupid deal.”

Well, if it was the largest commercial real estate trade of all time, then she’s about the biggest Monday-morning-quarterback of all time.

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Editors Note: This post is the second in a three day, three person opinion on the aftermath of the Stuyvesant Town/Peter Cooper Village deal going kaput. Yesterday Dave Jacobs wrote about its effect on the capital stack. Today Rich Weidel examines the effect on the CMBS market. Tomorrow, Dave Weinstein will explore the world of risk/reward. Stay tuned and enjoy!

Stuyvesant Town, bought for $5.4 billion in 2006 is now valued at $1.8 billion. After reading that Tishman is walking away from Stuyvesant Town and the $4.4 billion of debt piled up against the property, I’m wondering if CMBS defaults are going to become the next sub-prime mortgages. Is this the bottom, or just the beginning? Will CMBS defaults rip through the structured products market? It seems that we are at a crossroads, with arguments and predictions being made both ways. Regardless of what your gut tells you, the following chart from PREI shows the problem: Read the rest of this entry »

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The Week of January 16-22

- Are the credit markets reaching their peak?

- Good news for U.S. CRE?  European transactions have increased by 42%.

- Europe’s largest insurance company, Allianz, is increased CRE investment allocations.

- Earlier this week, Capmark Investments, a subsidiary of Capmark Financial, filed for bankruptcy.

- Has London surpassed Washington D.C. as the world’s favorite CRE market?
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Those of you generous enough to follow along with my weekly rants know I often like to go on about macro economics.  So, while I clearly have my own thoughts on the matter, it’s good to check in with the experts every now and then; even it it means blogging about another blog.

In this blog piece you can get the Real McCoy as it relates to economic analysis of commercial real estate.  Written by a professor of economics at the University of Chicago, the piece takes issue with another blog entry by the illustrious Paul Krugman.  ”Economists writing about economists?  Sounds a bit wonky,” you might say.  And, you might be right, but it’s still worth the discussion.

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It’s a new year, and with it comes hope.  Yet, for the commercial real estate industry, hope has been replaced by fear, skepticism, cynicism, and negativity.  Most of those feelings stem from the fact that most experts agree that things have to get worse before they can get better.  Namely, the 5 year CMBS loans taken out at CRE’s peak in 2007 are going to come due during an illiquid market in which banks either cannot or care not to extend or modify them. And that has led to Jekyll and Hyde regulation. Read the rest of this entry »

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The Week of December 26-January 1

- Here, you can read about how CalPERS completely and massively screwed itself.

- PREIT led REITs in small cap gainers in 2009.

- Its the end of 2009…just how harsh are the predictions for CRE defaults going forward?

- Dollar General is planning 600 new stores for 2010.

- The Hong Kong waterfront is a hot spot for real estate…just not as hot as once thought.
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The Week of December 19-25

- How far away is CRE from rebounding?  Could it only be a year away?

- The Fed has turned down only 3 of 58 legacy CMBS applications for TALF financing.

- How long could small banks suffer for their bad CRE bets?

- CRE in 2009: Where deleveraging is seen as the year’s biggest accomplishment.

- Despite the surge in REIT investment, could there still be opportunity?
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As we round out 2009, one of the most interesting top 10 lists we could conjure deals with all of the various changes in the capital markets as it pertains to the commercial real estate sector.  The availability of capital has diminished significantly, and for capital that remains available, return requirements, interest rates and loan terms have all changed substantially.  Let’s take a look at the top 10 changes:

10. Shorter amortization periods for fixed rate loans by 5-10 years - Many banks have cut back the amortization schedules on loans from 30 years to 25 years, and from 25 years to 20, or even 15 years in some asset classes. Shorter amortization periods means more expensive annual debt service payments.  This of course has a subsequent effect on cash flows as well as tradition debt service coverage ratios.

9. More equity deals being structured with debt-like components - Equity partners have shifted much of the weight of their return to their preferred position.  This, of course, means that they face losing significant upside on strong deals.  However, they seem to be happy to trade that upside return potential for greater security of their minimal required return.

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The Week of November 21-27

- Could a new kind of stress test be looming for CRE?

- With the future for CRE unknown, one expert advises banks to raise equity now.

- Regulators are pushing small banks to cut back CRE lending.

- Morgan Stanley admitted defeat, handing back Crescent Real Estate Equities to lender Barclay’s.

- A Hong Kong IPO brought in $2.5B for the Sands China…the low end of the range.
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The Week of November 14-20

- The bond market has a healthy appetite for TALF-backed CMBS.

- CRE is getting blamed left and right for the slow economic recovery.

- Is the CIT Group bankruptcy a sign that government rescue plans don’t work?

- Is CRE a bigger risk to smaller banks?

- Dozens of banks are in trouble despite TARP aid.
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