Commercial Real Estate Finance

Posts Tagged ‘Wall Street Journal’

Any of you familiar with poker have heard the expression “betting on tilt.”  Essentially, it describes a player who has let their emotions get the best of them, and is overbetting a particular hand (or multiple hands) to try and make back the money they just lost on a big hand.  Rather than play the cards in from of them, they have let a bad beat cloud their judgment into making poor decisions.

And that brings us to Lehman (remember them?), the once upon a time Wall Street behemoth who crumbled into oblivion with bad commercial real estate bets.  Well, now they are doubling down on commercial real estate, betting that we have reached a bottom. Read the rest of this entry »

Check us out in the following recent publications:

- The Small Business section of today’s Wall Street Journal in an article about Pop-Up Shops.

- GlobeSt.com’s monthly Philly 411 article which highlights a well known Philadelphia development, and the various risks associated with different members of the capital stack in the deal.

- The Philadelphia Inquirer ran a story about Temple University’s student housing projects, which features a deal done by Llenrock.

Opportunity funds have commonly been attributed as those who target lower quality buildings who often need additional investment for repositioning.  In return, they are supposed to achieve higher returns, with benchmarks in the high teens that reflect the higher risk associated with them.  Therefore, its not too much of a stretch to imagine that there would be more opportunity funds being raised in light of the recent economic distress and the toll it has taken on the commercial real estate industry. And there are. According to private equity research firm Preqin, 182 opportunistic vehicles are out there trying to raise money right now, with a target of $95 billion.   But if everybody sees things the same way, does that mean its still a smart bet? Read the rest of this entry »

Can you trade real estate just like this guy trades securities? Of course, but let’s face it. Investing effectively in actual real estate is tough. A few reasons why are that real estate tends to be illiquid, and is usually rather expensive (at least in comparison to other financial instruments). There are a few ways to maintain exposure to the real estate sector without having to buy physical real estate. One way is to invest in a real estate investment trust (REIT), an example of a publicly traded REIT is Hersha Hospitality Trust (NYSE: HT). REIT’s invest their capital in real estate, and you can invest your money in the REIT by buying stock. By law REITs are required to return at least 90% of their operating profit to shareholders. Because of this the REIT will pay dividends.  Personally, I love investments that pay some sort of interest or dividend because it makes the investment feel more tangible. Another popular benefit is that you can reinvest your dividend. Essentially you were just able to purchase more stock for “free.” I put “free” in quotation marks because nothing in life is ever free, and also because the stock price may have depreciated and your initial investment may have lost money.

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In a recent article in the Wall Street Journal it is suggested that while malls and office parks have suffered from the real estate swoon that has been talked to death at this point, there is a sector of commercial real estate that really has not been hit all that hard.  And it isn’t some niche asset class like medical office buildings or student housing, but rather a class of commercial assets defined by their lease structure, rather that the type of tenant they house. Read the rest of this entry »

1) What can we learn from Goldman Sachs?

Ignoring, entirely, the debate surrounding the series of accusations leveled at Goldman Sachs, we can still learn something useful from their circumstances:  Pay attention to what write on email!  I’ll remind you of an oft repeated rule of thumb: consider, before pressing send, what your email might look like as a headline in the Wall Street Journal.

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The easy answer would be: All of them. According to an article in the Wall Street Journal, Goldman Sachs estimates 7% of banks’ commercial mortgages will eventually go bad, even though banks have so far only booked losses and taken reserves equivalent to 2.5% of such loans. Logic dictates that that 4.5% gap will manifest its ugly head sometime over the next several years.  But which banks will suffer? Trying to figure out the answer to that question may be a bit like playing “Pin the Tail on the Donkey.” Those with the heaviest exposure to commercial real estate would be the smartest, most logical answer, yet that may not be the case, and that may make things very confusing.  Here’s why… Read the rest of this entry »

Maybe the Mortgage Bankers Association (MBA) needs to get an M.B.A. in real estate. As a recent Wall Street Journal article detailed, the company charged with helping borrowers source financing, drank their own financing Kool-Aid and succumbed to a tanking economy and real estate market.  Its one thing for an unknowing and unsuspecting homeowner to get a variable rate mortgage.  Its another for an organization of professionals taught to understand the pitfalls of such financing in an economy with unsustainable low interest rates.  The MBA sold their Washington D.C. headquarters, which they bough in 2007 for $79.1 million,  to commercial real estate data provider CoStar Group for just $43 million.

Rather than writing a blog post, I figured I would simply make the following comments, and let you, the reader respond with your own: Read the rest of this entry »

For the Week of February 6-12

- Will small U.S. banks have to start curtailing lending?

- Fannie and Freddie are set to purchase $200 billion in delinquent home loans.

- Multifamily REIT CEOs expect improvement in fundamentals in 2010 and a generally positive year.

- Mall landlords are expecting a much better 2010 according to WSJ online.

- An aquarium development deal in Times Square?
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The Week of January 31 - February 6

- Are real estate executives gaining confidence in the general market?

- Obama’s budget has hazy implications for commercial real estate.

- Former Security Capital Execs Plan REIT IPO.

- Despite the scare, Fannie Mae still funded over 80% of its loan originations last year with its MBS program.

- Will an infusion of TARP money into small banks result in productive lending to small businesses and real estate?
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