Commercial Real Estate Finance

Posts Tagged ‘Freddie Mac’

Commercial Real Estate Week In Review for the Week of August 14-20

- Will the Federal Reserve, FDIC, SEC and Commodity Futures Trading Commission really be transparent in the Dodd-Frank Act?

- How much of an impact is the current housing market complicating things for Fannie Mae and Freddie Mac?

- Bank of America is considering paring its stake in  BlackRock Inc., citing its not a core asset.

- The potential shake-up in ownership of bookseller giant Barnes & Noble has shopping center landlords nervous.

- Delinquent construction loans have reached a record level in the U.S.
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Commercial Real Estate Week In Review for the Week of August 7-13

- Bank of America is seeing very few requests from investors and insurers to repurchase sour loans.

- Could teaming up with REITs be a way for pension funds to boost their returns?

- Industrial Income REIT has been busy, buying 16 assets for $43.5 M.

- How does the Volcker rule change the game for private equity investments?

- Grant Thornton is predicting there will not be a recovery in commercial real estate until 2011.
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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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Commercial Real Estate Week In Review - The Week of June 26-July 2

- As if we learned nothing, CMBS is back, and property owners are taking advantage of the good rates and terms.

- Could financial regulation boost mortgage costs and limit choices?

- What are the benefits and challenges for nontraded REITs?

- One of the largest homebuilders, Lennar, has swung to profit.  What does this mean for housing?

- Despite the equity raised recently, REITs are not likely to go on a buying spree anytime soon.
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A US District Judge has ruled that a group of lenders can foreclose on Peter Cooper Village and Stuyvesant Town (from now on collectively referred to as Stuy Town). There are quite a few interesting substories to this latest chapter in one of the largest (and worst) real estate deals ever executed. So now what happens? The properties will be sold either together or in two pieces. The highest bidder will be chosen by a formal federal bankruptcy judge. But, who is going to buy it?

Well that brings us to interesting substory number one. Are the tenants going to lose out on another shot to buy the property. In 2006 a group of renters were outbid by a joint venture consisting of Tishman Speyer and BlackRock Realty. Now they potentially face competition from the current lenders. While it hasn’t been confirmed, a viable option for the creditors would be to make the high bid and hold onto the property until prices rise and they can recoup more or all of their losses. Currently the property is projected to be valued anywhere between $1.6 and $2.2B, down from the 2006 purchase price of $5.4B. The loan originally taken out was for $3.0B and in the lawsuit, it was deemed that the lenders are owed $3.76B. Along with the offer from the group of owners, which will be backed by CWCapital and others, there is probably going to be an offer from a team of investors including Wilbur Ross and the LeFrak Organization. This auction should be very interesting, and potentially heated as the group of tenants want to convert part of the property to condos, and have a non-eviction policy to protect themselves and other tenants from rent increases (something that was supposed to happen the last time around, but apparently didn’t. There is an ongoing lawsuit).

Let’s assume that the creditors don’t win or don’t offer a bid (no clue what the chances of this are, but just for giggles). This leaves the mortgage bond holders at risk for quite the loss given the current value of the property. Who owns half of the total loan worth of mortgage bonds? None other than Fannie Mae and Freddie Mac. So Fannie and Freddie stand to lose a lot of money on this deal, right? Well, according to a statement in January they weren’t going to lose anything. How did they accomplish this? Apparently Fannie and Freddie bought credit default swaps, protecting themselves against default. There must’ve been a thought in the back of their minds that this deal was bad from the beginning. I think it can be assumed that the only entity that this deal was beneficial for was MetLife, who sold the building at the wildly inflated price. Fannie and Freddie surprisingly played this one extremely well (for once?).

So who can lose from this? Well, obviously BlackRock and Tishman Speyer lost, as did the equity and mezz partners who have already quit.  But the lenders and mortgage bond holders still stand to lose a lot, especially if the government starts lobbying as it did last time. It’s no secret that Senator Charles Schumer (D-NY) personally called the CEO of MetLife to pressure him into accepting the tenant group’s offer. Whether or not the government will have more clout this time around or not remains to be seen, but accepting a lower price just so the tenants can win is ludicrous. It would burn the lenders, and the other investors, as well as set a dangerous precedent for the government to interfere in a private business transaction.

Best case scenario: the tenant group is the highest bidder, and everyone gets what they want/deserve. The tenants finally get rent stabilization, the lenders get some of their money back, and BlackRock and Tishman Speyer get nothing. Meanwhile, MetLife is probably laughing and sipping mai tai’s from their private box above the fray, because they can afford that.

Word broke recently of Fannie Mae’s first quarter results.  The verdict? An $13.1 billion loss. As a result, Fannie is asking the federal government for $8.4 billion in assistance, tapping into its currently unlimited line of credit.  The announcement comes less than a week after smaller mortgage finance company Freddie Mac, said it would need $10.6 billion in government funds after losing $8 billion in the first quarter. Last year, when Tim Geithner took Fannie Mae and Freddie Mac under conservatorship, this clearly could not have been what he had in mind.  And while Geithner and the current administration try to figure out a way to right the ship, both in the short and long term, patience amongst the taxpaying public is running out.  Some people are calling for a new solution.  Some say scrap it and start over.  Some say revamp the system with major overhauls.  Some say keep it as is and let it work itself out.  Some complain about the fact that the executives in charge of overseeing Fannie and Freddie are being paid $10M in salary and bonuses. But is that the real crime here? Read the rest of this entry »

Week of May 9-15

-Are lawmakers overlooking Fannie and Freddie in the reform debate?

-Goldman Sachs and Citigroup are partnering for what could potentially be the largest mortgage-debt financing connected to real estate for the acquisition of Extended Stay by Starwood Capital.

-Malaysia will have a new largest REIT in the third of fourth quarter after Sunway City’s IPO, which is expected to raise $459M USD.

-CBRE says Mexico’s commercial real estate market is poised for growth. I say watch out for drug wars.

-A tough real estate market is hindering recovery.
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The Week of March 6-12

- Senator Dodd proposed that the Fed continue its oversight of the largest banks.

- The FDIC loan auction could mean trouble for still-healthy banks.

- Dubai World is seeking to restructure $26 billion worth of debt….good luck with that.

- Should the Fed be gradually decreasing its balance sheet? The EVP of the Fed Reserve Bank of New York thinks so.

- Creditors have offered nearly $4 billion in commitments to GGP.
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For the Week of February 27 - March 5

- Does a strong REIT recovery after its drop in January signal the ability for REITs to go on the offensive?

- Could a Beijing real estate bubble pose a threat to world markets?

- Apartment REITs may debate build vs. buy as demand grows in the near future.

- While many REIT managers say demand for their offices, stores and warehouses is on the rebound, data shows that the real draw for tenants is falling rents.

- Colonial Properties is selling up to $50M of stock. Read the rest of this entry »

For the Week of February 20-26

- Should Fannie and Freddie be converted to non-profit, US-owned entities?

- Simon Property Group and General Growth Properties (two of yesterday’s post’s top earners) head to bankruptcy court in the $10 bil buyout deal.

- Can real estate investors bank on Hollywood’s staying power?

- John Klopp of Morgan Stanley sees debt investing as a significant opportunity going forward for investment banks.

- Does a 75% increase in sales volume in December over the prior month signal a true bottom in the market? Read the rest of this entry »