Commercial Real Estate Finance

Posts Tagged ‘commercial real estate’

We have talked ad nauseum about how the CMBS market appears to be back.  Well, right alongside private investors,  their institutional counterparts are lining up behind them….hungry for commercial real estate. In a recent report by Real Estate Research Corp. institutional investors seem to favor real estate as an asset class over their competition, mainly stocks and bonds.

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John Maynard Keynes

One tool employed by non-rocket-scientists on their way to success on Wall Street is short-cuts; e.g. P/E, PEG…etc. Needless to say, actual rocket scientists also work on ‘The Street’. In recent years, they’ve focused on derivatives and their goal is frequently to distill complex matters into simple variables (short-cuts) the rest of us can understand. Things like delta, gamma and CDS spread, are all the end product of mathematicians and physicists who figured out Wall Street pays way better than academia. All of these metrics, to one degree or another, can end up as a vehicle for getting away from inexorable investing realities. Read the rest of this entry »

How Will FinReg Affect Regional Banks?

Mariner Kemper, UMB Financial chairman & CEO, shares his thoughts on the impact of financial regulation.

What do Those Abroad Feel About Commercial Real Estate’s Impact on the Economy?

French Economy Minister Christine Lagarde shares her thoughts

Commercial Real Estate Week In Review for the Week of August 21-27

- The Dodd-Frank overhaul will impact private equity, real estate and hedge funds.

- Apartment buildings are leading delinquency rates in New York.

- Investors seem very eager about distressed retail opportunities.

- Wells Fargo is jumping back into CMBS.

- Believe it or not, commercial real estate actually made gains in the second quarter of 2010.
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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.

After plunging more than 40% from its peak in 2007, commercial real estate prices are beginning to stabilize bringing a return to Commercial Mortgage Backed Securities.  This revitalized interest in CMBS from yield hungry investors stems from the fact that lower property values limit lenders’ risks, and unlike during the boom years investors can expect banks to be lending to a higher caliber borrower.

While some banks remain unsure of jumping back into the CMBS game Wells Fargo & Co. (WFC: US), the top US commercial real estate lender, is not one of them.  According to an article in Bloomberg, Wells has hired more than 20 bankers and support staff to its team over the past three months to up its loan originations and bundle them into securities.  Of course Wells Fargo is just one example of banks revving up to take on new demand for CMBS, as we are seeing Citi Group, Deutsche Bank, Goldman Sachs, JP Morgan, Bank of America and a few new comers (Macquarie Group Ltd, Cantor Fitzgerald, etc.) stepping back up to the plate.

Making sure banks maintain their integrity when it comes to lending will be paramount for the long term success of the CMBS market, and I’m not sure they necessarily have the discipline.  At the moment it seems like banks are more cautious in their lending practices, but is this due diligence really happening to the degree to the degree we think it is, and what will happen when things bounce back and banks are tempted to once again throw caution to the wind?  If new protocol is actually in place I would like to see banks put their money where their mouth is.  The best way to do this would be to have CMBS originators obligated to keep a portion of the loans on their books, and have them not permitted to hedge that risk through a CDO transaction with a counter party.

Commercial Real Estate Videos of the Week

Philip Blumberg of Blumberg Capital Partners thinks the U.S. commercial office market is offering the best discounts in decades.

According to Tai Hui, regional head of economic research in Southeast Asia at Standard Chartered Bank, people in Vietnam buy property…with Gold!

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 »

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 »

The Fed is Maintaining its Securities Holdings in an Effort to Spur Economic Growth

Richard Yorke from Real Capital Analytics Suggest it May Be Time to Buy Commercial Real Estate