Commercial Real Estate Finance

Posts Tagged ‘lagging indicator’

Tis’ the season to be grouchy….if you are a real estate owner trying to figure out why your real estate taxes on your half empty building are so friggen high. As is the case with homeowners, or taxpayers of other varieties, commercial landlords find themselves ensnared in bitter wars against the municipalities in which their properties reside regarding the amount of taxes they must pay.  The issue is simple:  Municipalities want to get their fair share of property taxes.  The best way to do this is to levy taxes based upon values when times are good.  If buildings are full, NOI is high, and thus values are at their peaks which means more revenue for the municipality.  But when occupancy slips, NOI suffers and values go down….yet the real estate tax assessment doesn’t, and therein lies the problem. And you wonder why the municipalities only assess buildings “occasionally”…. Read the rest of this entry »

What’s the best way to stave off inflation fears?

Ironically….it may be to invest in Real Estate.

Should Obama force Community Banks to Lend?

Would you drive your car looking only in the rear view mirror? Why, then, would you make very important decisions about your future based on a lagging indicator like employment data? Read the rest of this entry »

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 »

Last week, the Wall Street Journal published an article citing a survey of 47 economists, the majority of whom said the recession is over and the economy had bottomed out. But the question remains: what does that mean?

Several key indicators must be examined in even considering whether or not a recession has ended. However, for the 247,000 additional people who lost their jobs in July, it seems more likely one could first find the bottom of a bottomless pit. This leads us to one indicator: unemployment. While the July unemployment rate dropped 10 basis points from 9.5% to 9.4%, this was due partially to a decrease in the labor force itself, as a greater number of workers have become so fed up with the job market they stopped looking for work entirely. Since then, the first two weeks of August have seen over one million Americans file for unemployment benefits. Read the rest of this entry »

Everyone knows that there is a bid-ask gap between buyers and sellers. Everybody knows that financing is extremely difficult with the credit markets still in turmoil. Everyone seems to understand that commercial real estate sector lags behind the rest of the economy. Yet everyone seems to forget what will really help get CRE out of its rut…fundamentals.