Archive for the ‘CRE’ Category

Trepp Reports a Jump in CMBS Delinquencies as Rate Nears 9% Again

By: admin
Published: December 7th, 2010

From DSNews
by CARRIE BAY

The recent optimism surrounding delinquencies on commercial real estate loans bundled into investment bonds has been hit with a blast of cold water. The rate of past due loans suddenly jumped in November after seeing a big decline the month before.

According to data from the New York-based research and analytics firm Trepp LLC, the percentage of loans held in U.S. commercial mortgage-backed securities (CMBS) that were 30 or more days delinquent, in foreclosure, or REO rose 35 basis points in November to 8.93 percent, putting the value of delinquent loans at $60.3 billion.

Trepp says November’s climb is the largest monthly increase since May 2010. The overall rate is the second highest reading ever recorded by the company, second only to this September’s measurement of 9.05 percent.

The steep upsurge follows a 47 basis point decline in the rate of CMBS loans 30-plus-days delinquent, in foreclosure, or REO reported by Trepp for the month of October, when

the company put the CMBS delinquency rate at 8.58 percent with a value of $58.3 billion. Trepp says October’s decline, which reflected the resolution of a $4.1 billion mortgage on Extended Stay Hotels, was the first time CMBS delinquencies have dropped in over a year.

Manus Clancy, managing director for Trepp, noted that enthusiasm had been building over the past six months among market participants that the peak for CMBS delinquencies was nearing.

“This jump in delinquencies comes despite the fact that new issues are starting to make their way into the calculation and the special servicers are becoming more adept at processing the troubled loans,” Clancy said. “While we expect both of these factors will continue to put downward pressure on the rate, it would not surprise us if the rate continued to bounce around a bit as it continues to rise over the next several months.”

Trepp’s latest report shows that mortgages for multifamily residences passed hotels for the dubious distinction of the worst-performing property type during the month of November.

The delinquency rate for multifamily CMBS loans came in at 15.80 percent last month in Trepp’s study. That compares to 14.56 percent for hotels, 7.59 percent for retail stores, 6.95 percent for office spaces, and 6.64 percent for industrial properties.

The overall delinquency rate for seriously impaired loans has also increased. Trepp says the percentage of loans seriously delinquent – meaning 60-plus days delinquent, in foreclosure, REO, or non-performing balloons – is now 8.13 percent, an increase of 17 basis points in one month.

©2010 DS News. All Rights Reserved.

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Commercial Real Estate Losses and the Risk to Financial Stability

By: admin
Published: February 11th, 2010

Commercial Real Estate Losses and the Risk to Financial Stability

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Still Optimistic About US Future?

By: admin
Published: February 11th, 2010

Feds push for tracking cell phones - “This is a critical question for privacy in the 21st century. If the courts do side with the government, that means that everywhere we go, in the real world and online, will be an open book to the government unprotected by the Fourth Amendment.”

Bailout panel cites commercial real estate dangerBetween 2010 and 2014, about $1.4 trillion in commercial real estate loans will come due for refinancing. For nearly half of them, borrowers could struggle to get new financing because they’ll owe more than the properties are worth.

Fed in Talks With Money Market Funds to Help Drain $1 TrillionInterest rates going up soon

Job growth may not curb unemployment rate: WHouseA new White House economic forecast showed Thursday the US economy is set to start producing job growth this year at a rate of 95,000 per month, but that the unemployment rate will remain high

Obama ‘Agnostic’ on Deficit Cuts, Won’t Prejudge Tax IncreasesObama, in a Feb. 9 Oval Office interview, said that a presidential commission on the budget needs to consider all options for reducing the deficit, including tax increases and cuts in spending on entitlement programs such as Social Security and Medicare.

Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’This is going to be a wad of cash coming into the fixed- income markets and it’s not immediately clear where it’s going to be reinvested…TCE knows…it is going to be reinvested in other bubbles

Bank Exposure to U.K. Government Debt May Pose RiskInvestors remain edgy about the creditworthiness of countries such as Greece and Portugal, but the biggest sovereign threat that U.K. banks may face is closer to home: exposure to U.K. government debt.

Hungary’s Budget Deficit May Overshoot 2010 Target, OECD SaysHungary’s budget deficit may exceed the government’s target in 2010 and 2011 as some spending cuts may “prove difficult to sustain,” the Organization for Economic Cooperation and Development said.

Pension plans less funded in JanuaryThe funded status of the 100 largest corporate defined benefit pension plans declined by $24 billion during January 2010.

U.S. Foreclosure Filings Top 300,000 for 11th Month - U.S. foreclosure filings rose 15 percent in January from a year earlier and exceeded 300,000 for the 11th consecutive month as modification programs failed to keep delinquent borrowers in their homes, RealtyTrac Inc. said.

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Commercial Real Estate Losses Would Wipe Out Entire USA Economy

By: admin
Published: February 2nd, 2010

From here

“The growing bubble in the commercial real estate industry has the potential to infect our economy and slow a recovery,” said Chairman Kanjorski.  “In order to safeguard the businesses operating on Main Street and protect the millions of jobs depending on commercial real estate, the Treasury and the Federal Reserve now must take needed and urgent action to stave off a potentially devastating wave of commercial real estate foreclosures and bank losses.”

“I am deeply concerned about the health of our commercial real estate market and the stability of thousands of small businesses across the country,” said Congressman Calvert.  “We must take the appropriate steps to ensure that our commercial real estate market does not experience a liquidity crisis that would further exacerbate our struggling economic situation.”

“A liquidity crisis in the commercial real estate market is hurting small business owners across the entire nation,” said National Association of REALTORS President Vicki Cox Golder, owner of the commercial real estate company Cox & Associates in Tucson, Arizona.  “I join with all commercial property owners who applaud the efforts of Reps. Calvert and Kanjorski to resolve this problem and put small business owners back in business.”

Specifically, the letter asks regulators to take the following steps:

  • Establish a clear method for measuring and evaluating the effectiveness of recent CRE loan modification guidance issued by the regulators.
  • Institute metrics to more clearly differentiate performing versus non-performing loans as well as any other steps that provide lending institutions with more confidence in assessing CRE loans.
  • Make clear public statements encouraging lenders to continue to make credit available for performing assets as a means of restoring confidence and long-term value in the CRE market.

The $6.7 trillion CRE sector supports 9 million American jobsIf the conditions in the CRE market deteriorate further the negative effects will be significant and widespread, rippling not only through the CRE sector but also the broader economyMore than $1.4 trillion in commercial mortgages will come due by 2013, and as much as 65% of those deals will have trouble getting refinanced according to recent analysis conducted by Deutsche Bank.  While the Federal Reserve and Treasury Department have acknowledged the ongoing CRE challenges, their actions have so far failed to ease growing concerns among economists and market participants.

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More on this topic (What's this?)
COMMERCIAL REAL ESTATE PRICES CONTINUE TO FALL
Commercial Real Estate Sub-Sector Breakout
Read more on Commercial Real Estate at Wikinvest

US Shopping Center Vacancies Hit Records

By: admin
Published: January 7th, 2010

From Reuters

Vacancies at U.S. strip malls hit an 18-year high in the fourth quarter and the vacancy rate for large regional malls reached the highest in at least 10 years, according to real estate research firm Reis Inc.

Strip malls — neighborhood and community shopping centers typically anchored by grocery or drug stores — had a vacancy rate of 10.6 percent in the fourth quarter, surpassing the high set in 1991, Reis economist Ryan Severino said in a report released on Wednesday. The early 1990s is a period often referred to as the commercial real estate depression.

“Our outlook for retail properties as a whole is bleak,” Severino said in a statement. “Until we see stabilization and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest.”

Reis said that continuing high unemployment and inconsistent consumer spending will weigh heavily on retail properties for at least another 18 to 24 months.

It expects the vacancy rate at neighborhood and community centers to keep rising, and rents to continue falling through 2011.

The deteriorating fundamentals could inflict strong headwinds for real estate companies such as Pennsylvania Real Estate Investment Trust (PEI.N), Macerich Co (MAC.N), Kite Realty Group Trust (KRG.N), Glimcher Realty Trust (GRT.N), General Growth Properties Inc (GGWPQ.PK) and Equity One Inc (EQY.N).

At the same time, it also could provide buying opportunities for cash rich companies, such as Simon Property Group Inc (SPG.N) and Kimco Realty Corp (KIM.N).

Asking rent at U.S. strip malls fell 0.5 percent from the third quarter to $19.12 per square foot in the fourth quarter, or down 2.05 percent for the year. Factoring in months of free rent and the landlord’s portion of the cost for interiors, effective rent fell 0.8 percent to $16.75 per square foot, wiping out rent gains over the past nearly four years.

For the first time in Reis’ 29 years of tracking the fundamentals of strip malls, effective rent in all of the 77 markets it covers declined.

“It is daunting to observe this acceleration in decline in what has traditionally been regarded as a stable property type,” Severino said.

The vacancy rate at large regional malls rose to 8.8 percent from 8.6 percent the third quarter. It was the highest vacancy rate for U.S. malls since Reis began tracking mall performance. Asking rent fell 0.4 percent to $39.03 per square foot, the lowest since the second quarter 2006.

“This is the first time in almost 10 years of quarterly history that Reis has observed rent declines for five straight quarters, and the year-over-year decline of negative 3.6 percent is the largest magnitude of deterioration over a 12-month period on record as well,” Severino said.

(Reporting by Ilaina Jonas; Editing by Richard Chang)

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CMBS Delinquencies Pass 6 pct for First Time

By: admin
Published: January 7th, 2010

From Reuters

The delinquency rate for loans underlying commercial mortgage-backed securities (CMBS) ballooned 500 percent in 2009, surpassing 6 percent in December for the first time, underscoring the rapid collapse of the U.S. commercial property market, according to real estate data provider Trepp.

The delinquency rate — the percentage of loans 30 or more days delinquent — among CMBS loans rose 0.42 percentage point in December to 6.07 percent. They began 2009 at 1.21 percent and the decade, before the U.S. commercial real estate boom, at 0.50 percent.

The casualties reached all types of commercial property. The delinquency rate among hotel mortgages mushroomed over 900 percent in the past 12 months to 13.87 percent, according to Trepp.

The office delinquency rate ballooned more than 560 percent to 3.42 percent in December, up 0.49 percentage point for the month. The delinquency rate for retail real estate loans in CMBS was up nearly 475 percent to 5.50 percent, up 0.72 percentage point in December.

The industrial delinquency rate rose more than 410 percent to 3.98 percent, up 0.65 percentage point in December. Multifamily was up 325 percent to 9.27 percent, up 0.28 percentage point for the month.

Still, the price of the bonds was stronger as the credit markets strengthened and the panic immediately following the collapse of Lehman Brothers abated. Spreads on recent vintage benchmark 10-year super seniors in December tightened by 0.65 percentage point on acreage above swaps.

For the year, the benchmark bonds finished on average at 480 percentage points over swaps, down 311 percentage points from their 2009 start of 811.

Tracking them to treasuries, the benchmark CMBS bonds ended the year at 353 percentage points over treasuries, down 493 percentage points from the 846 percentage point spread at the state of the year. (Reporting by Ilaina Jonas, editing by Matthew Lewis)

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The Future of the US Economy? Frightening

By: admin
Published: December 21st, 2009

And a good read from Wegelin & Co (the oldest Swiss bank). They are giving 3 scenarios for the future of the global economy

Investment Commentary 267

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