Distressed CRE Up 100% to $108B
“Commercial properties in the U.S. valued at more than $108 billion are now in default, foreclosure or bankruptcy, almost double than at the start of the year, Real Capital Analytics Inc. said.
There were 5,315 buildings in financial distress at the end of June, the New York-based real estate research firm said in a report issued today. That’s more than twice the number of troubled properties at the end of 2008.
Hotels and retail properties are among the most “problematic” assets following bankruptcy filings by mall owner General Growth Properties Inc. and Extended Stay America Inc., according to the report. The scarcity of credit is causing property defaults in all regions and among every investor type, Real Capital said.”
-Bloomberg, Distressed Commercial Property in U.S. Doubles to $108 Billion
July 8th, 2009 at 5:51 pm
So this is the start of the commercial real estate collapse everyone has been talking about eh?
July 8th, 2009 at 5:57 pm
But the number was better than expected.
July 8th, 2009 at 6:25 pm
I’m sure this all going to work out swimmingly…..Has the Fed started buying these loans yet? Maybe the Fed can just start buying all the houses, strip malls, office buildings directly…but it on their balance sheet…”they never lose a cent.”
July 8th, 2009 at 6:30 pm
isn’t it odd that non retail or hotels aren’t on the list also? we have been eliminating as many consumers (workers) as possible for some time now. or is that waiting to happen?
and we can add those plants that Chrysler and GM didn’t keep. they will be distressed soon too
July 8th, 2009 at 6:36 pm
sarcasm
PPIP to the rescue!!!
/sarcasm
Isn’t Deutsche bank selling Worldwide Plaza for 605 million? It was bought in 2007 for 1.74 billion.
REad more: http://www.calculatedriskblog.com/2009/07/cre-another-half-off-sale-and-market.html
July 8th, 2009 at 6:42 pm
I’m finding this a bit hard to believe
http://www.bloomberg.com/apps/news?pid=20601109&sid=aeTzfvEedKpQ
but I’m sure folks around here won’t be surprised!
July 8th, 2009 at 7:41 pm
Three big hourly volume spikes on SRS at close for last three days.
3.5, 4.4, 3.3 million shares respectively….
July 8th, 2009 at 7:41 pm
Andy, do I detect sarcasm in your post? I’ve just stayed away from SRS because it epitomizes 2007. And, to tritely but aptly put it, been there, done that.
July 8th, 2009 at 7:42 pm
it can only get worse-
suburbia is having some issues at the moment- like-
unemployment, no cash, credit maxed out- it appears-
the party is over
July 8th, 2009 at 7:44 pm
sorry…those are 15 min volumes….
July 8th, 2009 at 7:46 pm
PS. can’t wait to delve into MS’s REIT strategy tonight. At a quick glance, they give retail “malls” a favorable view and retail “shopping centers” an unfavorable…
July 8th, 2009 at 7:49 pm
Barry Sternlight, Starwood Capital chairman/CEO…..embracing the SUCK.
http://www.cnbc.com/id/15840232?video=1141899962&play=1
Sue Herera is a national treasure.
Whiskey Sour….I’m a Jim Beam man myself…but others work just fine….
* 1 1/2 oz whiskey
* 1 1/2 oz lemon juice
* 3/4 oz sugar syrup
* maraschino cherry for garnish
Preparation:
1. Pour the bourbon, lemon juice, and sugar syrup into a cocktail shaker with ice cubes.
2. Shake well.
3. Strain into a chilled sour glass.
4. Garnish with the cherry.
July 8th, 2009 at 7:52 pm
This is all baked into the stress test right?
July 8th, 2009 at 7:58 pm
Karen – mind if I ask you a personal question? You don’t have to answer if you don’t feel comfortable. How did you get into stock trading and how long have you been doing it?
July 8th, 2009 at 8:01 pm
karen- again-
nvda?
please elaborate- I don’t get that at all
July 8th, 2009 at 8:10 pm
Yet IYR is still 50% above the March lows and SRS has barely budged. Manipulation?
July 8th, 2009 at 8:12 pm
@Christopher (7:49)
You forgot the most important step…
#5…DRINK
July 8th, 2009 at 8:19 pm
@BR
Come on man…
I’m kinda joking here but I’m kinda not…Read the title…
“Distressed CRE Up 100% to $108B”
Parse out the $108B…add it to how much California is in the hole…
It STILL comes in way under the AIG bailout…
Things have to have T’s on the end of them these days to get any attention…How is it in the newsroom? “If it BLEEDS it LEADS”…or something like that…
July 8th, 2009 at 8:20 pm
I mean hell, that almost makes me want to buy REITS…jk
July 8th, 2009 at 8:40 pm
$108B
how many times do you multiply that one to get an idea of the losses?
July 8th, 2009 at 8:42 pm
@cv, i m n w/u baby
July 8th, 2009 at 8:43 pm
The thing laughable to me is the fact that Simon Property Group (the largest part of the IYR – to my knowledge)
& some others were EASILY able to re-finance their debt back in March…
I mean…screw me & my $$ (and the horse that I rode in – and HIS oats for that matter) if I’m wrong about this…
But what idiots were sitting there back in March making making decisions to front the $$ for these re-finance offerings (based on some assumption that the “cyclical” consumer downtrend was over and that growth would return to normal)…
How OUT OF YOUR MIND do you have to be?
Whatever…
Hell – let the FED put all that crap onto it’s balance sheet as well if it wishes…Then they can hang a sign on all the boarded up malls & strip malls that says “Property of the US FEDERAL RESERVE”…
I don’t live in NYC, so when I’m out on a drunken karaoke night with all the other blokes, I don’t have an AIG building I can ‘relieve’ myself on…This way, wherever I am in America, I’ll have a handy spot…
July 8th, 2009 at 8:50 pm
cv,
come on guy,
let it go, we are f’d and it is out of our control
remember drill, baby, drill – it will be print, baby, print….
July 8th, 2009 at 8:59 pm
End of the recession in site…
http://www.businesscycle.com/
… pick up some REITs.
July 8th, 2009 at 9:02 pm
@Wes
You know Wes? I’m starting to think differently about PRINT BABY PRINT…
well…let me clarify that…I was AGAINST it all along, but had kinda resolved myself to the fact that the powers that be would simply ramrod that through…
I’m starting to detect sufficient backlash…Not just here in the US, but watch closely the G-8 summitt…I don’t see a lot of motivation for QE…China is having its problems too…seems there is protest against the haves & have nots with regards to easy money…
Treasuries are FINALLY reflecting this (in small moves)…Gold & commodities aren’t so strong either…
GD2 is closer than many might think right now…
July 8th, 2009 at 9:03 pm
Venndata-
about time- good times are right around the corner
July 8th, 2009 at 9:04 pm
Nevermind…
read VennData’s research…
I’m out of my mind…GOODNIGHT
July 8th, 2009 at 9:09 pm
cvienne-
I took Vendata’s post as [snark] – no?
July 8th, 2009 at 9:13 pm
I wonder how well a minority owned startup would do bidding for govt owned RE prop mgmt services….
July 8th, 2009 at 9:22 pm
“The scarcity of credit is causing property defaults in all regions and among every investor type, Real Capital said.”
Scarcity of credit?
WTF happened to all of the F’ing liquidity we just pumped into the thieving banks? The very last thing we should be hearing right now is that there’s a scarcity of credit. The criminals have taken over the system.
And yes, this is the beginning of the CRE crash, and it will make the wrongly-named “subprime” crisis look like Otis bounced a check at the liquor store.
July 8th, 2009 at 9:28 pm
i think i am w/cv
MA – wtf? wtf? come on dude the bleeding has a long way to run
deflation first, inflation second…sorry to bring that up again, but….there are still Austrians out there
July 8th, 2009 at 9:36 pm
I know, Austrians like Josef Fritzl. I hope he rots in hell.
July 8th, 2009 at 9:39 pm
I don’t buy the scarcity of credit crap. The fact is there’s too much retail and hotel space out there. So they aren’t credit worthy. We all know here the litany of problems that is all due to the root problem of misallocation of resources that was driven by a huge debt binge enabled by easy money (and those bad Chinese savers, of course).
But there’s a lot of scapegoating going on out there using the “financial crisis” and “bank panic” as excuses to cover up for stupid, greedy business decisions. They want to spread and bolster the perception that this was an unforeseeable one-off consumer panic, to cover their asses.
July 8th, 2009 at 9:43 pm
…yah Onlooker, no doubt…
July 8th, 2009 at 9:45 pm
@Onlooker, there’s scarcity of credit where it’s “needed”. Why would a bank want to lend money to a builder in this climate? And if your FICO score sucks, too bad getting that car. It’s not readily available where it used to be. Hence the available money ends up in “safer” places.
July 8th, 2009 at 9:48 pm
Is this even remotely a surprise to anyone who has half a brain? CNBC, Cramer, and Dennis Kneale, perhaps, but who else? Got SRS?
July 8th, 2009 at 9:52 pm
Wes:
of course it has a long way to run — I’m just pissed that the deflation is allowed to crush everyone despite the blatantly inflationary measures that have already been foisted on the taxpayer. We will be double screwed. Like I said, the criminals have taken over the system.
July 8th, 2009 at 9:53 pm
PPIP news pulled out at just the right time. I’m sure insiders weren’t tipped off before their little stick save in the final hour today. Here we go again. This saga is going to play out over many years. No need to get impatient anymore. Spent most of the day away from my desk enjoying the summer but checked on my B-berry from time to time.
July 8th, 2009 at 9:54 pm
no lending money, no inflation
print baby print can’t do a damn thing w/o the bank multiplier effect
shadow banking debt bubble collapse rate is bigger than the fed expansion rate, no?
July 8th, 2009 at 9:55 pm
cvienne,
Props on your “SPX 880-910 range-bound into OPEX” call. Not counting the chickens yet, but your post forced me to close some shorts yesterday and hedge on the long side today. Good thing I did, considering how AA’s earnings are touted as a success.
Let’s get this OPEX over with so I can reload on short IYR side and long TLT.
One thing, disagree with you on Gold. I’m buying January 2011 GLD 70 puts.
July 8th, 2009 at 9:57 pm
MA,
i have had a change in mind set
i was an inflationist
now, i am a conflicted deflationist
July 8th, 2009 at 9:58 pm
By the way, over the weekend I drove by an enormous BMW dealership that is under construction right now here in Minny. Also drove by a few condo buildings still being completed. Thought to myself, “just what we need right now, more empty buildings everywhere”. Whatever. I’ve committed myself to enjoying the summer. Green shoots for Mannwich.
July 8th, 2009 at 10:00 pm
Manny,
enjoy,
enjoy,
enjoy
July 8th, 2009 at 10:08 pm
Wes:
It is, no doubt, deflation, and the printing hasn’t kept up with the bad debt. Nonetheless, the idea that the money we have provided to the banks is being withheld to their exclusive benefit is a bit difficult to take.
July 8th, 2009 at 10:13 pm
MA –
we are on the same page,
it took me a while to get there…
the banksters and their government regulatory accomplices have looted the treasury and the american sheeps and non-sheeps, too
July 8th, 2009 at 10:14 pm
Thanks Wes. It’s been an awesome summer here thus far. I’m almost feeling all green shooty (not quite). Good weather is the best drug to us here in the North Country.
July 8th, 2009 at 10:17 pm
I’m sure that Merrill will upgrade a few more REITs tomorrow.
@Manny:
4 or 5 years ago, I visited my father in Toledo, OH. There was a combined Land Rover + Jaguar dealership going up in a suburb that I drove through. I visited him again recently and noticed that the buildings were empty and the lots were empty. I would love to meet the man responsible for making the decision to put up a Land Rover dealership in the rust belt.
July 8th, 2009 at 10:18 pm
Onlooker:
“I don’t buy the scarcity of credit crap. The fact is there’s too much retail and hotel space out there. So they aren’t credit worthy.”
You asked and answered yourself here. There’s a scarcity of credit now because too much credit was given to build too much retail and hotel space that is now worthless.
Marcus Aurelius:
“Scarcity of credit?
WTF happened to all of the F’ing liquidity we just pumped into the thieving banks? The very last thing we should be hearing right now is that there’s a scarcity of credit. ”
This is what a credit crunch looks like. The thieves that gave away credit/debt too easily are now hoarding the cash to pay off the debts they KNOW are going bad. All the liquidity you speak of is NOT leaving the banks in any meaningful way.
July 8th, 2009 at 10:20 pm
Manny,
it has been hellishly hot down in H-Town
glad to hear you are enjoying the weather up north
Rio was really sweet, winter in the southern hemisphere and a tropical climate
July 8th, 2009 at 10:22 pm
@AT: And nor will that “liquidity” leave the banks any time soon. What a farce.
July 8th, 2009 at 10:24 pm
Andy T – part two to MA, yeah, that’s what i’m talkin’ about as well
July 8th, 2009 at 10:25 pm
Did everyone watch Hugh Hendry on FT.com all at once?? Seems like more people on the D-Train!
July 8th, 2009 at 10:28 pm
AT,
that’s exactly correct about the banks, we’ll see it when they report “earnings”. this is just another example of deflation at work, credit deflation.
July 8th, 2009 at 10:29 pm
@oblom 9:55
Does it really surprise you that AA would beat and Timmy/Hank would ride in with the PPIP at the perfect time? They just got a really big bond auction out of the way, time to focus/prop-up stocks. Just wish I waited a day longer before picking up SSO.
Eagerly waiting initial claims tomorrow….
July 8th, 2009 at 10:32 pm
And let’s face it – - not to to be Mr. Obvious (cut me some slack, I’m in my ignoramus summer green shoots mode….), but the money the feds threw at the banks wasn’t REALLY primarily intended to get credit flowing again for Main Street. It was/is mostly to cushion against future losses that are going to come in periodic tsunami-like waves in the coming months/years.
July 8th, 2009 at 10:33 pm
Any impressions on bank earnings? I imagine they will crush estimates by virtue of the increase in asset prices ie: rally off March low.
July 8th, 2009 at 10:36 pm
@Capitalist: Of course they’ll all beat. They can report basically any number they want in perpetuity. I’m not touching that vampire FAZ again until after bank earnings are in.
July 8th, 2009 at 10:37 pm
Manny stop peaking under the rug, we’ll deal with it in Q4!
July 8th, 2009 at 10:39 pm
I’m thinking about buying some FAS 9 calls tomorrow. JPM/BAC and GS all reporting next week.
July 8th, 2009 at 10:40 pm
@Capitalist: I’m sticking with my call that we’ll see The Fall in the fall part deux, probably beginning in Sept/Oct, maybe Nov. In the meantime, I have a summer to enjoy. It only lasts about three weeks here.
July 8th, 2009 at 10:41 pm
The liquidity not leaving the banks is what I’m talkin’ about. What good is bail out money if it only bails out banks? As I said, were double fucked (maybe even triple — if you count the bill we’ll still owe once the deflation and ultimately the inflation that’s sure to follow have run their courses).
We’d have been better off if they’d have actually dropped money from helicopters.
July 8th, 2009 at 10:44 pm
@MA: This plan was never designed to bail out or help anyone but the banks (meaning Hank, Tim, Larry, & Ben’s buddies). Once you accept that, you’ll sleep better at night.
July 8th, 2009 at 10:47 pm
@Manwich
I’m with you on that call.
Just hoping we can squeeze a bit more out of this rally before green shots turn brown this fall for selfish reasons. I have a monster of a bet on SSO – totally irresponsible I won’t do this again. If the jobs report sucks tomorrow I will take my lumps…and move on…
July 8th, 2009 at 10:48 pm
CapitalistCanuck,
It did. I should’ve paid attention to aluminum prices during the quarter — doubled. That covers “better than expected” lower q-o-q revenues.
Now that aluminum is rolling over it may be a good candidate for a short on the pop. I’d be shorting at
July 8th, 2009 at 10:50 pm
… $10.60 – $12.34 levels. Above $12.60 you’d have a breakout, so that would be my stop.
July 8th, 2009 at 10:54 pm
“We’d have been better off if they’d have actually dropped money from helicopters.”
THAT MY FRIEND IS EXACTLY CORRECT.
The problem with Helicopter Ben is he didn’t follow through on what really needed to be done….
They should have just put $10K on everyone with an IRS number every month for a year and called it good….It would have cost the same amount of money and you actually would have stimulated the economy…..No need for a stimulus package….no need for a bailout….just dump cash directly into bank accounts on a periodic basis until GDP turned positive. I’m barely joking….
July 8th, 2009 at 11:02 pm
@oblom
That may not be a bad idea, but I don’t have the balls to short commodities. Too many people loading up as a hedge against inflation/ USD. Plus China buying resources for infrastructure under their stimulus plan.
July 8th, 2009 at 11:07 pm
Andy, now that would be inflationary! If they give it directly to the banks like they did that’s fine and dandy, just means YOU can still access YOUR money at the ATM
July 8th, 2009 at 11:10 pm
Andy T
re: http://www.ritholtz.com/blog/2009/07/distressed-cre-up100-to-108-billion/comment-page-1/#comment-191336
Oh, make no mistake. I didn’t have a question there. I know the score. I just find it rather humorous and aggravating at the same time when I hear this crap about getting credit flowing again. Undoubtedly there are credit worthy people/businesses out there that have found it harder to borrow money, but I don’t think the numbers are very large, and that’s not what we’re talking about here (CRE).
July 8th, 2009 at 11:11 pm
CapitalistCanuck,
It’s not the China’s purchases that were driving the prices, but the speculations that China would make an impact. Now with commodities limits a real possibility, the cockroaches are running for cover. No real demand outside of China to prop up the prices. Cue in commodities deflation. Chain reaction from there on.
On the other hand, injections through the banking system aren’t getting through. Witness H.8 report lower lending numbers (http://www.federalreserve.gov/releases/h8/data/ww/b1001a.txt). And stimulus spending is too slow to make an immediate impact.
I’d say we are looking for at least 9 month of deflationary winds.
July 8th, 2009 at 11:11 pm
AT – sweet, but, not going to happen…
July 8th, 2009 at 11:12 pm
$108 B barely qualifies as chicken feed, compared to all the money that Obama is throwing around (or compared to the assets that Bernanke has already purchased).
July 8th, 2009 at 11:14 pm
Andy T @ 10:54
You’re probably correct about the economics; but it’s all about the politics.
Benefit the few at the expense of the many.
That, to a large extent, is what government is all about.
July 8th, 2009 at 11:27 pm
oblom
I’m a deflationist too…but I’m just not concerned that the banks aren’t lending, it’s the markets natural response. The REAL credit crises is for unqualified borrowers – I think we all agree to that. The credit report today showed fewer people using credit and more are paying down debt, I suppose it’s a bad thing in this type of economy…I forgot what the point was…I’m outta here, hope we see a positive jobs report tomorrow or I won’t be taking vacation in August lol
July 8th, 2009 at 11:29 pm
Amen to that.
July 8th, 2009 at 11:34 pm
@Andy:
Why stop at $10,000 a month? Make it a million dollar lump sum per family and you have an instant boom economy with money left over to pay those pesky credit card bills! Then give each family a Cadillac Escalade, courtesy of Government Motors…that’s creating American jobs.
July 9th, 2009 at 12:39 am
An example:
http://swamplot.com/just-couldnt-say-goodbye-ottos-back-from-the-edge-of-the-market/2009-07-08/
July 9th, 2009 at 12:47 am
@Steve Barry, you’ld get my vote.
July 9th, 2009 at 4:12 am
[...] woes continue unabated Jump to Comments It’s not over, folks. Not by long shot: Commercial properties in the U.S. valued at more than $108 billion are now in default, [...]
July 9th, 2009 at 4:48 am
I’m up early this morning so I missed most of this thread…
Very entertaining!
@oblom
“I’d say we are looking for at least 9 month of deflationary winds”…
I’m with you on that…I even think you got the timeframe correct…It could perhaps go longer, but something tells me that Larry Summers is the next Fed Chief…I think THAT alone will kill the dollar…So all the INFLATIONISTAS will get their hats handed to them for the balance of ‘09 while we all hang out in Govvies, and then when they’ve given up and started crying “deflation”, we’ll pick up their shares…
@Capitalist Canuck
“I’m thinking about buying some FAS 9 calls tomorrow. JPM/BAC and GS all reporting next week”
I wrote something to I-man the other week that outlined several points, one of them was that I didn’t have any sense AT ALL with respect to banks…So personally, I don’t see a point in jumping in front of the bank reporting…I’d rather wait until AFTER they report and fade the move…
Here’s the thing: If the stocks pop on fishy reporting, they’ll come back to earth…If they DON’T DO ANYTHING on what seems to be correct news, then you’ll know that the game is up and you’d better start seriously positioning yourself for the fall FALL…If they drop, wait out the drop, let them come back, THEN fade them…
The bottom line (the way I see it), is this…Since 956, the S&P is reversing HARD off of tops, yet sputtering and coughing when it hits support levels…Moreover, the support levels always seem to get hit a few trading days before EVENTS (like end of quarter, or opex)…It tell s me that this market is going DOWN when nobody is looking…perhaps August, with major support beginning to be broken as early as the end of July…
Oil is “almost” in bear mode as it is closing in on 20%…Even gold can’t break $1,000 (and I don’t think will) for ‘09…
The move to the YEN was very fast…That screams “carry trade” speculation in commodities back into pictures of poets & bacteriologists (or whoevers face is on the Yen these days)…And did everyone see how well the TBill auction went?
So I think we have one more shot to take a peek over 900 while the recent “unwindings” back and fill and the banks report whatever the hell they want…but after that………….
July 9th, 2009 at 10:25 am
cvienne,
Dig your timing outlook. One note, saw an articles on CNBC this morning. Somebody in government predicting lower initial claims for the next two weeks due to seasonal adjustments of some kind. May prop us up past OPEX.
July 9th, 2009 at 12:20 pm
@oblom
“Somebody in government predicting lower initial claims for the next two weeks”
initial claims today were reported lower…
What a BEAUTIFUL THING the 4 day workweek does…
Near the end of the Roman Empire, there were something like 255 out of 365 days a year dedicated as ‘holidays’ to go to the Colisseum and be entertained with Gladiator fights…What a WONDERFUL thing that does to quell the rising unemployment angst…