Commercial Real Estate Bust

Dow(n) For The Count

Bill Bonner, Coming Social Unrest, Commercial Real Estate Bust, Constitutional Questions, Consumption Ran the Old Economy, Coup d'etat in America No Responses »

Aug 062011

Investors were staggered yesterday. Stocks got walloped.

Dow down 512 points.

Today, bond yields are falling… oil is below $86. London, Paris, Frankfurt – all down heavily. Only gold has resisted the general rout. It lost only $7 yesterday.

Why?

The reason is debt. It won’t go away. It won’t say ‘adios’ and get on a bus. Like a bad houseguest, it won’t leave!

The feds have tried to ignore it. They’ve tried to postpone it. They’ve tried make the problem go away by stimulating the economy to grow faster.

But nothing has worked. Day by day the debt grows larger… And day by day, the moment of truth grows closer.

What truth?

That you can’t make excess debt disappear. It has to be paid…either by the borrower, or by the lender. Someone has to suffer.

Why is that? Because borrowing takes from the future. Sooner or later, the future shows up and wants to be paid. It wants its ‘pound of flesh.’ Its recompense. It wants what is due.

Yes, dear reader, a high speed train may have changed the world of travel. The invention of Viagra may have changed man’s love life. And don’t forget Facebook; it’s had a big effect on social life. All around us is Progress with a capital ‘P’!

But where is the progress in the world of money? How is debt today any different from debt 1,000 years ago? How are bankers’ mistakes any different? They lent too much to the wrong people in the time of Caesar; they make the same mistakes today.

And what about money itself? There was…Read more…

Depression? It depends who you talk to…

A Growing List Of One Term Presidents, A Moral Question - Not A Political One, A Shareholder-Not Just a "Stakeholder", A State of Distress, “the Greenspan doctrine”, Bank Failures, Bilderbergers 1 USA 0, Coming Social Unrest, Commercial Real Estate Bust, Commodity Market, Construction Issues, Consumption Ran the Old Economy, Coup d'etat in America, Credit Card Debt, Death of the Dollar, Deflation-Inflation-Stagflation, Dismal Science-Ignorant Scientists?, Economic Analysis Isn't Science, Even the Terminator Can't Help California, Federal Reserve-Discussion, Figures don't lie but Liars can figure, Greenspan is kind of stupid, HEY AMERICA-STICK 'EM UP!, Investment in Infrastructure Is A Win/Win, Is Goldman Sachs Evil?, Is The Market Rally Real?, It Is Nice To Be Part of the Elite!, It Is Supposed to be a Republic!, It's the Tribes, Jacksonian Democracy, Let's Call What It Is - DEPRESSION 3 Responses »

May 012011

How can so many Americans believe that we’re in a depression, when the stock market and commodity prices have been booming?
Read the Rest…

“They did it. Yes, there is a ‘they’: the captains of finance, their lobbyists, and allies among leading politicians of both parties, who together destroyed an American regulatory system that had been functioning splendidly. …”

A Moral Question - Not A Political One, A Shareholder-Not Just a "Stakeholder", A State of Distress, A Time To Repent, AIG and all that....., “the Greenspan doctrine”, Bilderbergers 1 USA 0, Catholic Social Teaching, Collateral Damage, Coming Social Unrest, Commercial Real Estate Bust, Consumption Ran the Old Economy, Coup d'etat in America, Death of the Dollar, Decapitalization, Deflation-Inflation-Stagflation, Dismal Science-Ignorant Scientists?, Economic Analysis Isn't Science, Even the Terminator Can't Help California, HEY AMERICA-STICK 'EM UP!, Insolvency, It Is Nice To Be Part of the Elite!, Jacksonian Democracy, Labor Issues, Obama Bingo, Our phony middle class, Patience is a virtue...Delusion is a vice, Political Chaos, Read and Weep Entries, The American Financial Oligarchy, The Arrogance of Power, The excellent adventures of Ben Bernanke, The Great American Heist, The Growing American Fascist State, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Judeo-Christian Political Coalition, The Obama OMG magic factory, The Suffering Poor, Time For A New Third Party, Truth In Charity, Unemployment Catastrophe, Unindicted Co-Conspiritors, USA Is the New Japan, Wage Deflation, Who Guarantees the Guarantor?-You Do!, Who owns Congress-Still! No Responses »

Apr 092011

The delusion of a classless America in which opportunity is equally distributed is the most effective deception perpetrated by the moneyed elite that controls all the key levers of power in what passes for our democracy. It is a myth blown away by Nobel Prize winner Joseph E. Stiglitz in the current issue of Vanity Fair. In an article titled “Of the 1%, by the 1%, for the 1%” Stiglitz states that the top thin layer of the superwealthy controls 40 percent of all wealth in what is now the most sharply class-divided of all developed nations: “Americans have been watching protests against repressive regimes that concentrate massive wealth in the hands of an elite few. Yet, in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.”

That is the harsh reality obscured by the media’s focus on celebrity gossip, sports rivalries and lotteries, situations in which the average person can pretend that he or she is plugged into the winning side. The illusion of personal power substitutes consumer sovereignty—which smartphone to purchase—for real power over the decisions that affect our lives. Even though most Americans accept that the political game is rigged, we have long assumed that the choices we make in the economic sphere as to career and home are matters that respond to our wisdom and will. But the banking tsunami that wiped out so many jobs and so much homeownership has demonstrated that most Americans have no real control over any of that, and while they suffer, the corporate rich reward themselves in direct proportion to the amount of suffering they have caused.

Instead of taxing the superrich on the bonuses dispensed by top corporations such as Exxon, Bank of America, General Electric, Chevron and Boeing, all of which managed to avoid paying any federal corporate taxes last year, the politicians of both parties in Congress are about to accede to the Republican demand that programs that help ordinary folks be cut to pay for the programs that bailed out the banks.

It is a reality further obscured by the academic elite, led by economists who receive enormous payoffs from Wall Street in speaking and consulting fees, and their less privileged university colleagues who are so often dependent upon wealthy sponsors for their research funding. Then there are the media, which are indistinguishable parts of the corporate-owned culture and which with rare exception pretend that we are all in the same lifeboat while they fawn in their coverage of those who bilk us and also dispense fat fees to top pundits. Complementing all that is the dark distraction of the faux populists, led by tea party demagogues, who blame unions and immigrants for the crimes of Wall Street hustlers.

The Delusion Of a Classless United States – Robert Scheer, The Nation

The QE Failure

A Changing Europe, A Growing List Of One Term Presidents, A Moral Question - Not A Political One, A Shareholder-Not Just a "Stakeholder", A State of Distress, A Time To Repent, Catholic Social Teaching, Collateral Damage, Coming Social Unrest, Commercial Real Estate Bust, Consumption Ran the Old Economy, Creditors Caveat, Death of the Dollar, Deficit Death Spiral, Deflation-Inflation-Stagflation, Deleveraging, Small Business-Bedrock of America, Smaller Can Be Better, Subsidiarity, TARP fruit loops, The American Financial Oligarchy, The Consequences of Greed, The Currency Wars Officially Begin, The Economics of Schumpeter, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Judeo-Christian Political Coalition, The New American Socialism, The Obama OMG magic factory, The Suffering Poor, Unintended Consequences, USA Is the New Japan, Wage Deflation, We Are All Cooked, We Have Become Beggars To The World, Who Guarantees the Guarantor?-You Do!, Who owns Congress-Still! No Responses »

Oct 242010

The world seems full of smoke ahead of a world currency war. The weapon of choice is quantitative easing, a.k.a. QE. If you print a trillion, I’ll print a trillion. Of course, he and she will too. No change in exchange rates after a trillion? Let’s do it again, QE2. If you listen to people like Geithner, the end of the world is quite near. Rich people everywhere are buying gold for a little peace of mind, not just the Chinese. They are literally trucking it by the ton or two home. When currency values vanish in a QE melee, at least the rich have the gold to stay rich.

If you listen to American pundits, politicians or government officials, it’s all China’s fault. China is far from perfect. Its currency policy certainly isn’t. But it is not the cause for the world’s ills. The U.S. is by far the biggest source of uncertainty and the initiator of the QE war. Its elite created the biggest financial bubble since 1929, even removing regulations designed to prevent it, and left the U.S. economy in shambles after its burst. The same people want to find a quick cure to hold onto their power. Unfortunately, there is no quick cure.

The U.S. has cut interest rates to zero and run up the budget deficit to 10 percent of GDP. It’s a shock-and-awe Keneysian policy. But, after a few quarters of strong growth, the economy is turning down again, and the unemployment remains close to 10 percent. And this figure would be much higher, close to 20 percent like Spain’s, if it included the underemployed and those who have stopped looking for work.

The stimulus has failed.

QE: The Numberless Oblivion Andy Xie, Caixin.

Commercial Real Estate: End of Extend and Pretend?

Commercial Real Estate Bust No Responses »

Oct 032010

Buck Wargo at the Las Vegas Sun reports that “extend and pretend” for commercial real estate (CRE) might be ending: Lenders gaining speed in going after commercial foreclosures

[The] tsunami of commercial foreclosures … never materialized as … lenders were working with owners to lower interest rates and extend loans … Now that philosophy is starting to change.

“[A] number of banks have been hesitant to pull the trigger on foreclosures, but we have seen recently banks are beginning to go ahead with the foreclosure process.” [said John Delikanakis, an attorney with Snell & Wilmer]
…
“Banks are beginning to realize where they are at in that loan,” [Rob Moore of Faris Lee Investments] said. “They were postponing it waiting for things to get back where they can get out of the hold, but that’s not going to happen.”
…
“The time for ‘extending and pretending’ by the banks for a variety of commercial real estate loans has ended,” [John Restrepo, principal at Restrepo Consulting Group] said. “There finally is a realization by the banks, regulators and borrowers that the market will not recover sufficiently to save many commercial projects from foreclosure.”

Las Vegas is in worse shape than most other areas, but it sounds like the lenders are now moving ahead and foreclosing on CRE properties – and that might mean the pace of CRE foreclosures will pick up nationwide.

What they knew and when they knew it

A Growing List Of One Term Presidents, A Moral Question - Not A Political One, A State of Distress, A Time To Repent, AIG and all that....., Audit the auditors?, Bilderbergers 1 USA 0, Coming Social Unrest, Commercial Real Estate Bust, Consumption Ran the Old Economy, Coup d'etat in America, Federal Reserve-Discussion, Having Fun With Derivatives, Insolvency, Integrity and Responsibility, IT'S ALL ABOUT POWER AND MONEY, No Bank Is Indispensable, Obama's Hypocrisy, Our phony middle class, Political Chaos, Political Implications, Regulatory Failures, Ron Paul Stands Tall, Securitization, Stress Test Mess, Sub-Prime anytime, TARP fruit loops, The Arrogance of Power, The Consequences of Greed, The excellent adventures of Ben Bernanke, The Financial Elite, The Geithner Resignation Watch, The Habits of Hedge Funds, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Judeo-Christian Political Coalition, Time For A New Third Party No Responses »

Jan 312010

“I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals — too many counterparties, too many lawyers and advisors, too many people from AIG — to keep a determined Congress from the information.” James P. Bergin, NY Fed, in an email to his Fed colleagues

‘Though it is hard to divine much understanding from the unredacted filing, it has become clear that Goldman had more involvement than previously believed: In addition to the credit default swaps it bought from AIG, the filing shows that Goldman Sachs also originated many of the underlying assets that AIG and the New York Fed bought back from Société Générale.

The American people have the right to know how their tax dollars were spent and who benefited most from this back-door bailout,” said Kurt Bardella, spokesman for Issa. “Now that it’s public, let’s see if the sky really does fall as the New York Fed said it would to justify its coverup.”

Other lawmakers believed that the New York Fed was trying to hide its ties to Goldman Sachs.’ AIG Reveals the Story – CNN

“Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny…

By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.

This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank…

New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa.

That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.” Secret Banking Cabal Emerges From AIG Shadows – Reilly – Bloomberg

Hat Tip to : Jesse

NY Fed Conspired to Hide Details of AIG Bailouts from Public and Congress

Sic transit America?

A Growing List Of One Term Presidents, A State of Distress, A Time To Repent, AIG and all that....., “the Greenspan doctrine”, Back to the basics, Collateral Damage, Coming Social Unrest, Commercial Real Estate Bust, Consumption Ran the Old Economy, Coup d'etat in America, Death of the Dollar, Deflation-Inflation-Stagflation, Devaluation, Dismal Science-Ignorant Scientists?, Even the Terminator Can't Help California, Federal Reserve-Discussion, Figures don't lie but Liars can figure, Integrity and Responsibility, Is The Market Rally Real?, It Is Nice To Be Part of the Elite!, It starts with a foundation, IT'S ALL ABOUT POWER AND MONEY, Monetary Policy - Discussion, Our phony middle class, Patience is a virtue...Delusion is a vice, Political Chaos, Politicians, Prostitutes and Pimps All Rhyme, Small Business-Bedrock of America, Sub-Prime anytime, TARP fruit loops, The Arrogance of Power, The Consequences of Greed, The Democrats Blew It Again, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Global Economy, The Habits of Hedge Funds, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Judeo-Christian Political Coalition, The New American Socialism, The Sorry State Of American Manufacturing, Time For A New Third Party, Truth In Charity, Unemployment Catastrophe, US Trade Imbalance, USA Is the New Japan, We Are All Cooked, We Are All Guilty, We Have Become Beggars To The World No Responses »

Jan 162010

Flagging: a US sailor stands on the flight deck of the aircraft carrier USS George Washington

If a week is a long time in politics, a decade is starting to look like an age in geopolitics. Comparing the America that began the 21st century with the America of today is to witness a country that has in some ways quite radically altered its view of itself and its relationship to the world.

In short, the metallic rust of decline has crept into the American soul. “You could argue that the first decade of the 21st century was the last decade of the American century,” says David Rothkopf, a former Clinton administration official and student of US foreign policy. “We are now entering the multipolar century.”

Self-doubt tarnishes Brand America

The Big Government Boss isn’t going away

A Growing List Of One Term Presidents, A Shareholder-Not Just a "Stakeholder", A State of Distress, AIG and all that....., Analysis & Commentary, “the Greenspan doctrine”, Coming Social Unrest, Commercial Real Estate Bust, Deflation-Inflation-Stagflation, Is Goldman Sachs Evil?, It starts with a foundation, IT'S ALL ABOUT POWER AND MONEY, No Bank Is Indispensable, Obama's Hypocrisy, Our phony middle class, Political Chaos, Regulatory Failures, Small Business-Bedrock of America, Smaller Can Be Better, Socialism, TARP fruit loops, The Arrogance of Power, The Consequences of Greed, The Democrats Blew It Again, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Financial Elite, The Geithner Resignation Watch, The Habits of Hedge Funds, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The Joy of Being A Bank, The New American Socialism, Unemployment Catastrophe, Unindicted Co-Conspiritors, Wage Deflation, We Have Become Beggars To The World, Who Guarantees the Guarantor?-You Do!, Who owns Congress-Still! No Responses »

Nov 212009

“Hindsight is a wonderful thing,” said Timothy W. Long, the chief bank
examiner for the Office of the Comptroller of the Currency. “At the height of
the economic boom, to take an aggressive supervisory approach and tell people to
stop lending is hard to do.” Post Mortems Reveal Obvious Risks at Banks, NY Times

“Increasingly, the determination of when to default is not guided by the moral question: Is this the right thing to do? It is guided by the pragmatic concern: Am I too far underwater on my mortgage?”

A Growing List Of One Term Presidents, A Saturday Break, A State of Distress, A Time To Repent, AIG and all that....., Back to the basics, Bank Failures, Collateral Damage, Coming Social Unrest, Commercial Real Estate Bust, Coup d'etat in America, Credit Card Debt, Creditors Caveat, Death of the Dollar, Deflation-Inflation-Stagflation, Deleveraging, Insolvency, Integrity and Responsibility, It Is Nice To Be Part of the Elite!, Lending Crisis, Mortgages, Obama's Hypocrisy, Our phony middle class, Residential Market, Sub-Prime anytime, TARP fruit loops, The Arrogance of Power, The Democrats Blew It Again, Time For A New Third Party, Unemployment Catastrophe, We Are All Cooked No Responses »

Jul 252009

Walking Away When You Can Pay By Kelsey VanOverloop

Homeowners are turning to the “strategic default” — walking away from a mortgage even when there are funds available to keep paying. “Increasingly, the determination of when to default is not guided by the moral question: Is this the right thing to do? It is guided by the pragmatic concern: Am I too far underwater on my mortgage?” writes Kelsey VanOverloop. Read more »

The equity of overleveraged REITs is at risk of elimination or permanent impairment

Commercial Real Estate Bust, REITs No Responses »

May 062009

Yet the stocks of real estate investment trusts (REITs), which are popular among income-oriented retail investors, are still trading at high enough levels that discount a ‘garden-variety’ recession in commercial real estate.

REITs were designed to invest in portfolios of rental properties, and generally pay no corporate income taxes if they distribute at least 90% of their profits as dividends to their shareholders.

“REITs thrive in an environment of steadily rising property values and rents. But in this ice age for commercial real estate, the REIT business model will cease to function properly; a REIT’s tax-free status doesn’t allow it to retain much excess capital during lean times. Since REITs pay out all their earnings, they cannot grow without taking on more debt. During the boom, a REIT strategy encompassing growth, leverage, and acquisitions was a virtuous cycle that led to juicy dividends and soaring stocks; in this bust, it’s morphed into a vicious cycle of dividend cuts, dilutive equity offerings, debt offerings at double-digit interest rates and bankruptcies.

“The REITs that levered up and grew too fast at the peak will go to zero in bankruptcy. Others could fall into the low single digits by year-end as the market anticipates that creditors will take title to many properties in 2009 and 2010. These developments would push the value of the REIT Index dramatically lower.

Treasury Says Lending Has Fallen Among Banks Getting Government Aid

Cash Flow, Commercial Real Estate Bust No Responses »

Apr 162009

The largest bank recipients of U.S. government aid are offering less credit to businesses and consumers, the Treasury Department said Wednesday, reflecting and exacerbating the tenuous state of the current economic environment.

In a monthly snapshot of lending by the 21 largest banks receiving Troubled Asset Relief Program funds, the Treasury said credit being offered fell 2.2% across all commercial-lending and consumer-lending categories in February, compared with the prior month.

Particularly problematic: continued deterioration in commercial real estate and general business lending, as well as the credit being made available for student and auto loans.

The lone bright spot remained home loans, with consumers eager to take advantage of record-low interest rates to refinance their mortgages.

The Treasury said 16 of the 18 banks surveyed increased mortgage originations in February, resulting in a 35% increase in mortgage lending from January levels.

The February decline in lending adds to pressure on the Obama administration’s efforts to restart the still-fragile credit markets.

The Treasury has committed $95 billion in TARP funds for new programs to boost consumer and business lending, though they are either just getting started or are still in the development phase.

The report suggests that jawboning by federal officials for banks to use TARP funds to boost lending is having a limited effect.

The Treasury blamed the decrease on the broader economic weakness, including low consumer confidence, high unemployment and a decrease in U.S. exports.

It also said lending would have been lower absent the nearly $200 billion in capital injections the government has provided to about 550 banks.

Banks’ diminished appetites for lending are forcing businesses and consumers alike to curb their spending, which risks prolonging the U.S. economic recession.

Commercial Real Estate’s Ballooning Threat

Commercial Real Estate Bust No Responses »

Apr 012009

Stephen Taub – CFO.com | US

The next credit crunch will come in the commercial real estate business, where many heavily leveraged companies are experiencing a loss of tenants and lower rents due to the lousy economy.

One potential trigger point could be looming balloon mortgage payments that are coming due, with unlucky timing, amid the worst credit crisis and real estate slump in decades.

A case in point is the Mall at The Source in Westbury, N.Y., on Long Island. The owners have defaulted on a $124 million interest-only balloon loan, according to Newsday, which cited Trepp, a firm that tracks commercial mortgage-backed security transactions.

The mall, which houses bankrupt retailers Fortunoff and Circuit City, had a 10-year-old balloon loan that matured on March 11, according to the paper, citing Thomas Fink, senior vice president of Trepp.

Newsday said the loan servicer, LNR Properties, listed the loan as a nonperforming mature balloon loan. In other words, the servicer has given up any hope of getting paid.

The loan was issued in 1999 by Nomura, the paper noted, adding that the owner of the mall is listed as W&S Associates.

“What’s been happening is that more and more commercial properties have been having trouble refinancing balloon payments that are coming due,” Fink told the paper. “There’s no market right now or the market is not giving them the proceeds or the rate they want to refinance the mortgage.”

http://www.cfo.com/article.cfm/13399429?f=most_read