Real Insight. Real Estate.

Posts Tagged ‘liquidity’

So, for months I’ve been subjecting you to my musings regarding the intersection between commercial real estate and macro economics.  Of course, right when I stop droning on for a week or two, a “crisis” in Greece ostensibly causes a 9% “correction” in stocks.

Well, I’m back, and I’m here to help…. well, at least to make some smart-ass comments.

Let’s begin.

The “crisis” really isn’t about Greece, it’s about the whole Eurozone, and it’s not over.   When they tell you the situation in Greece has been settled, just ask them if the “subprime crisis” is still well contained.  While it’s tempting to think I’m being overly dramatic, people far smarter than I will tell you the Euro is doomed to failure.  Tomorrow?  The next day?  Perhaps not, but well within your business career.

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An analysis of the housing crisis by Karl Case:

For the last few years, we have shed many tears
Living through a recession.
The economy’s broke and it’s not a joke,
When we talk of another depression.
Fifteen million without a job,
Foreclosures and banks that fail,
401K’s became 201K’s,
And everything’s up for sale.

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Wondering how to squeeze some more liquidity from credit markets still thawing at a glacial pace? The solution may lie in your property itself. Traditionally a developer apportions 100% of the cost of improvements among initial buyers. Each buyer then has no choice but to pass along these costs to future buyers. What if there were a way to share such burden with future buyers of your asset, and capitalize on it today? Read the rest of this entry »

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Ryan joined Sentry in 2009 bringing a wealth of financial experience to the organization with a special focus in Hospitality Real Estate. As the holding company’s CIO and Principal, Ryan oversees all capital, investment and new business development transactions. In addition, he controls relationships with investment partners, lending institutions, and oversees Finance and Operations for Sentry Centers, the new urban conference center platform of the company. Ryan comes directly to Sentry from Gramercy Capital where he served as a Vice President responsible for the workout and restructuring of Gramercy’s hospitality related assets. Prior to this, he worked for Lehman Brothers within their commercial real estate group. Ryan is an active member of the Urban Land Institute (ULI) and a graduate of Villanova University.

Q: As a company, tell me about the niche you have carved out for yourself and how you feel you are different from the competition. Why do you find this product type more appealing than alternative real estate asset classes?

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We’ve been writing about it for months, so I’ll not have any sympathy for those caught off guard by recent headlines regarding the US Yield Curve. As this chart from the New York Times shows, 2009 was the year of curve steepening. With the Fed printing money like mad to keep over night fed target rates low, it’s been up to the back end of the curve to do all the moving. The question, of course, is why? And, why do we, the commercial real estate market, care? Read the rest of this entry »

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Which one of these kids is doing their own thing?

What is interesting about this chart?

I’ll give you a hint: it’s the blue line. More specifically, it’s the bit at the end that pops up when all the others go down. Read the rest of this entry »

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The Week of November 28- December 4

- $1.3 Billion in TALF funds are set to buy CRE bonds

- Banks are intensely lobbying Congress to not pass legislation that could break them up.

- Wait, what? Retail deals are getting done?

- Dubai World may sell their trophy properties in order to raise cash.

- Interestingly enough, the government of Dubai, UAE has rejected the idea they are responsible for Dubai World’s debt.
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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 »

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Last week marked the one year anniversary of Wall Street’s collapse. There have been many stories about it in the press recently.  Here were our favorites:

1.  This is about Wall Street Jobs…most expected firms to shed jobs like crazy.  Turns out to be quite the contrary:

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Last week, A Warren Buffet-led group struck a deal to acquire Capmark Financial Group Inc.’s mortgage banking business . A newly formed entity owned by Buffet’s Berkshire Hathaway Inc. and Leucadia National Corp. was given a put option to purchase Capmark’s North American servicing and mortgage banking businesses. Capmark operates three core business lines: lending and mortgage banking, investments and funds management, and servicing. The latter of which is, and has been drastically adversely affected by the poor performance of the first two. Jeff Zaun from S & P remarked recently, “We expect Capmark either to enter Chapter 11 bankruptcy proceedings or to negotiate a distressed exchange outside of bankruptcy, which most likely would affect most of its debt. We will consider either of these events to be a default.” And Buffet’s bid reflects either possibility, offering $490M, or $415M if Capmark files for bankruptcy. So why do I expect Capmark to choose bankruptcy?

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