Commercial Real Estate Finance

Posts Tagged ‘credit’

For years, the place where I got my start in the business, Marcus & Millichap, made a killing on single tenant net lease deals.  Most often, these deals were being sold by merchant developers who had great relationships with a particular retailer, be it Walgreens (WAG), CVS or Advanced Auto Parts (AAP).  In other cases, there were sale leaseback transactions.  Either way, Marcus’ ability to shift capital across geographic boundaries was unmatched because of the timing and financial pressure of 1031 tax-deferred exchanges.  Investors would buy deals well outside their geographic comfort area so long as the credit of the single tenant was good, the return was OK, the lease was long, and they could defer their capital gains.  But with the new accounting regulations in the financial reform we have seen of late, the onus for companies to do sale leasebacks is changing in a big way. Read the rest of this entry »

These days many people are interested in buying new homes at fire sale prices, but the thought of selling their home at those same low prices is less than ideal. Read the rest of this entry »

Commercial Real Estate Week In Review for the Week of July 17-23

- Is Tim Geithner the biggest winner of  financial regulation reform passing this week?

- Meanwhile, Barney Frank is aiming to tackle Fannie and Freddie.

- GGP is finally ready to emerge from bankruptcy…and on strong financial footing.

- Innkeepers USA Trust is readying for bankruptcy.

- Private Equity still seems to be shying away from real estate int he second quarter.
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A “desert island” is one that is uninhabited by humans.  Usually this is because it hasn’t been discovered yet, the terrain is too tough to develop, or it is simply is too far away from a mainland to realistically support an economy. But what happens when islands that are created nearby a mainland for the sole purpose of development and occupancy by humans goes indefinitely uninhabited?  Perhaps those qualify as ‘deserted desert islands’. And if you want the scenic view of the economic crisis, deserted desert islands might be the place to start.  While Florida might provide you with some (oily) sand, vacant shoreline buildings, and some stalled beachfront developments, it is nothing compared to the picture above. That picture is of “The World,” a cluster of man-made islands off the coast of Dubai.  Read the rest of this entry »

Regardless of whether your political inclinations bear to the left or right, chances are that as an American you’ve become weary of government “bailouts.”  There’s something about the federal government meddling in free markets that is very “un-American.”  We scoff at the Chinese and call them “currency manipulators” when their government artificially holds down the value of the Yuan.  Both the Executive and Legislative branches of the U.S. Government have made requests to China to eliminate the peg.  But when we’re faced with similar circumstances in the U.S., do our officials step up to the plate and lobby for minimal government intervention?  No they don’t—And the best example right now is Fannie and Freddie.

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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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The credit crisis is beginning to mirror Congress.  Good ideas and solutions to problems are getting muddled by bureaucracy.  Much like global warming, or any other potential disaster, the government must act before its too late. And really there are only two outcomes to the credit crisis…what happens if market liquidity returns, and what happens if it doesn’t.

If market liquidity returns, real estate values will stabilize, in turn stabilizing banks’ balance sheets.  More balance sheet lenders would return to the market, which would cause CMBS yields to normalize, causing a restart to the CMBS market, which would make the spreads on refi’s fall.  With the glut of debt coming due over the next few years, this would be essential to providing more normalcy, and averting disaster.  However, if market liquidity doesn’t return, real estate values would fall even further, banks balance sheet would deteriorate, borrowers would fail to be able to refinance and banks would de-lever.  This would cause forced loan extensions as well as loan defaults, which would wipe out equity positions, and force distressed sales. So what’s the solution to providing liquidity to the market? Read the rest of this entry »

In the last 18 months, banks’ balance sheets were decimated by having to “write down” the values of perceived “toxic assets” that were on their books.  This led to the devaluation in bank stocks, which tightened the grip on credit harder than Shawne Merriman’s hands on Tila Tequila. The (literal) collateral damage?  In the hundreds of billions.  We now collectively refer to this debacle as the credit crisis.  But could the resurgence of the market for distressed assets lead to a quick reversal of fortune for both banks and the real estate industry as a whole? Read the rest of this entry »

For the last couple of years only one country has dominated every conversation about the next emerging economic and political superpower: China.  The country’s mercantilist policies have been the center of heated debate and controversy and have placed China at center stage of a global economic revolution.  Through strict and methodical monetary and foreign trade policy, China has dramatically increased its influence over foreign economies, most notably the U.S. economy.  The latest development in China’s ever increasing impact on the U.S. economy is the nation’s endeavor to invest in U.S. CMBS.  Could this be the long-awaited answer to catalyzing movement in CRE capital markets?

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