Real Insight. Real Estate.

Posts Tagged ‘risk’

Editor’s Note: As the second installment in a three week blog series, Questionable Brokers will  posit questions regarding Types of Capital. Last week, the first part of the series examined questions regarding Real Estate Metrics. Next Week week we will wrap up the series with questions Deal Structure. These are real questions from real real estate brokers. Enjoy!

Q: What is the difference between mezzanine debt and preferred equity?

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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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In her latest blog entry, a woman named Megan McArdle took a brave stance!  She said that Tishman and Blackrock’s collective decision to buy Stuyvesant Town for $5.4 Billion was a “…breathtakingly stupid deal.”

Well, if it was the largest commercial real estate trade of all time, then she’s about the biggest Monday-morning-quarterback of all time.

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The last asset you want to hold during an inflationary period is cash. While you won’t lose any zeros in your savings account, your buying power will slowly get eroded. Here’s a great list of the top 10 best hedges against inflation, courtesy of www.egold.com :

10) Stocks. Investors seem conflicted on whether or not stocks provide a good hedge against inflation. Most studies have tracked major indexes against inflation, and they still find that stocks perform decently during inflationary periods – at least as long as inflation stays under 4-5 percent per year. Higher than that, and you’re going to have to pick your stocks carefully. However, some stocks will likely do well no matter how bad inflation gets. If you believe the dollar’s doomed, try an ETF that tracks the dollar in an inverse relationship. Or stick with companies well-positioned to profit from inflation. Investment banks, for instance, are generally pretty savvy at protecting their money, so they’re going to make it their business to ferret out inflationary hedges. That means you can ride off on the coattails of their profits. Read the rest of this entry »

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Bloomberg published an informative article yesterday highlighting the reasons why debt financing is so much more expensive for governments than private companies.  You would think that governments that NEVER default on debt issuances and have unlimited tax revenue could issue debt at a cheaper cost than private companies.  Municipal bonds, however, are often issued at rates anywhere from 100 to 150 bps higher than private companies.  What’s the reason for this?  Moreover, what lessons can an owner/investor of commercial real estate learn about debt financing from the municipal bond market?

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