Consumers are carrying a record $907 billion in credit card debt, and that looks likely to jump now that the housing slump has blunted another popular financing tool -- home equity loans.
OK, so I know I sound like a broken record, but buying puts on CFC was obvious with Tangelo at the helm. Who is the enemy who deserves to be punished when commercial real estate comes crashing down? Leona Helmsley's dog?
This is very base (sadly didn't discover CR until the late in the game when the easy money was already made in the 'short the ML/HB' contest and feeling a need to catch up a bit) but does anyone care to share some thoughts/suggestions on good shorts in the CRE space?
CRE is officially toast as is condo development. PHX is the canary in the coal mine and the amount of spec buildings in good locations as well as bad is amazing. If it's next to a freeway their building with no tenants in place beyond a title company.
And as bad as RI is here, CRE is gonna be waaay worse.
Ministry of Truth, I know some people in CRE, and they've been telling this cycle will be different, CRE is healthy, the architects are busy, etc.
I pointed out that this cycle might be LATER than usual for two reasons: 1) the slump in CRE following the stock bust might have left more demand, and 2) the residential cycle was so huge it might take longer to get CRE to peak.
But those are arguments for a longer lag between residential and non-residential, not a "it's different this time" cycle.
With the credit crunch, the expected slowdown is probably here.
Haps
Do some research on Provident Realty and see what you think. You are going to have to do your own research son. They seem to have put a huge new urban development including hotel on hold at Walnut Hill Lane & Central I75 North in N.Dallas/Preston Hollow. (borders my hood).
Just imagine how the OC office market rents and vacancy assumptions are playing out for investors, based on the expectations they built in when they bought stuff the last couple of years at 4% cap rates. Oh, happy days in CRE are here again. Wonder what those valuation meetings are like and all the imaginary tenants they will think up to fill the empty space. Anything to avoid the reality of what those buildings are really worth. Probably wont get as bad as the SV RE market after the tech bust, but you might get a few see-throughs here and there in time.
In my poorly informed opinion... the CRE bust will be to the 'central states' what Res RE bust is to the coasts. I have no data, proof or anything but what my eyes have seen.
You just can't imagine the CRE build that has and still is going on in such 'densely populated' places like Des Moines, Omaha, Rochester MN, Madison Wis, Minneapolis-St. Paul, St Louis, KC... on and on.
It isn't just Chicago though Chicago subs have been built up frighteningly over the last five years... anyone passing through take a drive out to St Charles, Geneva, Aurora... or up north by McHenry or anywhere in Lake County... it is endless.
Its been just about everywhere.
I can see the coasts supporting some of this build, the people are there. I can even see the Chicago growth being absorbed eventually - Chicago isn't Podunk.
But Des Moines? Rochester MN? Come on, get real.
The coasts might get the R-RE bust worse but the middle will get the C-RE bust worse.
NEW YORK (Reuters) - Some 57 percent of mortgage broker customers were unable to refinance their adjustable-rate loans to avoid higher monthly payments in August, suggesting the U.S. housing slump may worsen, according to a national survey on Tuesday.
Subprime borrowers had trouble refinancing mortgages because loan programs were no longer available, according to a poll of 1,744 brokers in the last week of August by Campbell Communications, a Washington-based research firm. Prime borrowers were impeded by appraisals and high loan-to-value ratios, it said.
The CRE valuation bubble may not have gotten as bad as the Residential RE valuation bubble. But it's hard to imagine CRE will emerge from an economic downturn unscathed. Expect stupid CRE loans to sour and reckless CRE speculators to suffer just like their RRE brethren (though I think the magnitude of any CRE downturn will NOT be as severe as what we're seeing in RRE)
I think the article title should have been "Empty Offices Leave High Landlords Dry" given what these landlords were paying for existing and/or new spec construction. Remember, if it seems too pricey and risky, it probably is.
one thing I have noticed is many real estate related tenants moving into "main street" locations- brokers, mortgage companies, etc. in what would otherwise be prime small retail spots. I don't foresee this lasting much longer.
In Fredericksburg, Va. on Lafayette Boulevard, there is a new strip mall, 18 store fronts, a work in progress for two plus years, the 18 storefronts were completed eight months ago, billed as condo commercial originally, and are all vacant today, for sale or lease.
It was about two years ago that I went to Waldorf, Md. and discovered a sudden explosion of For Sale signs, when the housing market had been: list today, sell tomorrow, dont bother with a For Sale sign. Six months later the For Sale signs were all over Washington, DC.
The five quarter delay works just like how things expand from the inside out and collapse from the outside in.
The commercial collapse in Virginia is moving right up I95 north to Arlington and Alexandria. And any MSM or ivory tower observers notice of this will be after the fact.
dryfly, interesting view - and probably correct (as usual!).
I think CRE will take a hit on the coasts too, but vacancy rates are pretty low in most coastal areas - so it's the new supply coming on line that is the biggest problem. For areas like the Chicago suburbs, CRE is already in deep trouble.
Mike_in_Fl, I'm interested in seeing the FDIC "Emerging Risks" report due out in November. There was a heavy concentration in CRE for mid-sized institutions last year - and if CRE slumps, we will probably see a lot of institutions in trouble. It won't be as bad as the '80s, but CRE defaults could make the credit crunch worse.
CSGP and LOOP are listing services specifically for commercial properties; they depend on commercial real estate brokers for their business. CSGR is the big established player. LOOP is the high-flying start-up "category killer", and is therefore probably both more lucrative and more dangerous as a short.
I suppose you could short anything from roofing to carpet to wallboard, but those stocks have largely been hammered already thanks to residential.
There are probably some public commercial builders and contractors, but I do not know them.
And remember: Always look to anonymous people on the Internet for investment advice
Anecdotal from my point of view -- Commercial real estate in the Detroit has been growing like Topsy over the last couple years, while residential real estate and the auto industry have been in a severe recession. This will not end well...
Please enlighten me someone who knows CRE: I would expect that businesses would move out of offices faster than people move out of houses. I would think it is easier for a business to go BK than a person.
The CRE landscape is different than the last bust in '01 because there has not been an inane run up in office rents. Some cities still haven't come close to '01 prices. Buildings have increased in value because people have lowered their cap rates to match that of other various yields, albeit most other products are more liquid. But at least we didn't have the nominator increasing while the denominator was decreasing. As CR said the real threats will be in over supply and BK'd tenants. Oh... and maybe a small problem with financing
Oddly enough, the stuff on the Indian land is probably best positioned. The Salt River Tribe controls the land co-developed. No prop. taxes, easy access, can't be undercut in a downturn. makes the pain farther north on the 101 that much worse.
Geoff: your comment says it all. 4% caps? Sounds exactly like the bay area market to me. Where was their common sense? Their valuation models must be real works of fantasy. Jesus, this is going to be a big mess. Thanks again, Alan GreedScam.
"based on the expectations they built in when they bought stuff the last couple of years at 4% cap rates"
Please enlighten me someone who knows CRE: I would expect that businesses would move out of offices faster than people move out of houses.
I'm a small biz guy who has at times 'officed outside the home'... and when things get tough I've dropped my leases like soiled underwear - that fast.
On top of that I've never been forced to sell the house... and I've seen my income fall 80% before...
Plus this strategy has enabled me to survive three recessions as a result of getting out of bad situations very fast.
So 'ya' I think your assumption & generalization is correct.
Currently I try to make wherever my laptop & cellphone is my office... Might be my home, might be Panera in Madison or a truckstop on I 35. The rent can't be beat... cup of coffee and a doughnut.
The above "When Flying to Quality, Be In the Bank" should have been posted under the Countrywide thread. It's an excellent read about banks, bank holding co. & FDIC. All important to know in the event of bank failure when it's far too late to change anything legally.
--
People need to dig up and read reports from Silly.con Valley during 2001-03:
Total Employment fell MORE THAN 20% in Santa Clara County.
Office Vacancy Rate was more than 35%
And Apartment Rents fell 35-45%.
It was a short-lived depression. The area residents got saved by the Housing Bubble that began there in 2004. Next time around there would be no more bubbles to save the residents. And the depression would be nationwide.
Here's another item that may cloud commercial real estate: an implosion among 1031 exchange companies. Some went belly-up, taking their real estate investors' pseudo-escrow money with them.
Transactions must be handled by so-called qualified intermediaries like 1031 exchanges, which have temporary custody of about $150 billion a year, an industry group says. They are unregulated in all but one state.
The bankrupt firms' owners are accused of using client funds to invest in other businesses, emptying bank accounts of more than $250 million. No criminal charges have been filed.
...
Most customers, including Slotten, also lost the chance to buy property they sought. She planned to acquire two new buildings housing Walgreen Co. drugstores and live off the revenue. Instead, she returned to her job as a real estate broker and is taking finance classes to enter a new field.
...
``The problem has put a pall over these types of transactions,'' said Michael Machado, a California state senator who proposed state regulation to prevent bilking of investors.
I don't think it's too late to short Corus Bankshares (CORS) even though they have dropped 50% since January.
They have the heaviest exposure to Florida condo lending and big condo lending exposure in general. Also, they have a relatively small Chicago-based branch network and may have some CRE exposure in Chicago.
They sold high yield 1-year CDs on the Internet to raise deposits, and a lot of that money is hot and will go elsewhere as their yields fall.
I think you are probably correct about some mid-american cities. I lived in Rochester and I'd bet that total CRE footage probably tripled from the early '80s to now... but population probably went up 50% or 60%. Of course, there is a lot more immigration to that part of the country than you would expect. But, still...
There is a 3 month lag between default and foreclosure, so at a 50% flow-through rate we should see about 1200 REO's/month by year end.
That's about 50% of existing home sales for the county.
BTW, there are some double counting issues with 2nd lien defaults, but Rich Toscano looked into the % of 2nd defaulted liens and found them to be low. Apparently its less costly to just write off the 2nd liens than to begin the foreclosure process on them.
"Massive Motown foreclosure auction
Nearly 700 homes will be sold during a three-day auction in Detroit."
...
""Buyers set the prices," said Crystal Wright, spokeswoman for Hudson & Marshall, "but it's a reserve auction [for the most part]; sellers have the right to accept or reject the bid."
In past auctions, winning bids were accepted 92 percent of the time. Some houses are listed "absolute," meaning any bid will be accepted.
"[In some cases] the sellers have indicated that any bid will be OK," said Webb. "It's costing them too much. Even if a house brings just $100, they'll still have to sell it."
StagflationaryMark - "Have you ever considered a career in the horror movie business? Your words scare the @#$% out of me!"
LOL. Nope, no one has ever said that to me before. However, an Art Professor in undergrad once told me I might make a good pop-artist (think Andy Warhol of Campbell Soup Can fame).. Heh, I try to make a meaningful contribution in society and all I seem to have a talent for is schlock. Oh well.
mike in florida I don't agree.If you purched a commercial building last year at a 5.5% cap rate and three years later cap rates return to a more rational level of say 8%,you are down 30% before taking into consideration any rent increases that may have taken place. And given the level of spec building under construction this might be a very small number.
I've seen a trend in retail/restaurant CRE over the past decade, companies building new stores even where there was no demand growth -- just to gain competitive turf and scale.
For example, there are four pizza chain stores within a square mile, but one chains builds two new stores in the same area, just so they can cluster business and drive out competition. (Only the competition is still there.)
Way too much retail/restaurant space and employment.
Jim - 5.5% to 8% all else equal is a death sentence. You only need to go 5 to 6% and add a marginally higher vacancy rate and a wee bit weaker rent growth to require a trip to the ER.
Even after cutting their losses, the banks aren't off the hook yet. The loans now off their books were just one part of a $3.5 billion loan package.
The fact that the banks were only able to unload a portion of the Allison loans doesn't augur well for deals involving lesser credits.
"I was surprised that $1 billion of the deal was all they can scrape together," said Justin Monteith at KDP Investment Advisors. "It's sort of sad, too, because it's a much better company and a much better leverage situation" than other companies with deals pending in the pipeline, and "everyone's known about this deal for a while."
Yep, it's sort of sad, alright. The sordid state of global finance, that is.
Andrew - I met a guy who bought a house at an auction in the 80s bust... 'absolute, zero reserve bank auction' where his bid was the only bid.
He bid on a new 3 br, five acre home on the North Shore by Little Marais-Tofte... about a half mile off the highway with a clear view of Lake Superior from his deck through mature Norway pine, birch & aspen and with a Class I trout stream running through the property.
Now you are from the region - care to guess how much that would go for now? Half a million maybe? More? I have no idea but know it would be a lot. Even in 80s dollars a contractor friend of his guessed the original owner had at least $125K in it - just the house!!
He bid $8K and won it - NOBODY wanted real estate, especially second home real estate, back then.
Now Detroit isn't the North Shore... but I'm thinking we could be getting to that same mind set here pretty quick... give this thing a year or so more to work on people's paranoia.
No quick end to turmoil, says Paulson
By Eoin Callan and Jeremy Grant in Washington and Tony Barber in Brussels
Published: September 11 2007 22:31 | Last updated: September 11 2007 22:31
The crisis of confidence in credit markets is likely to last longer than any of the financial shocks of the past two decades, Hank Paulson, Treasury secretary, warned on Tuesday.
He said the uncertainty in credit markets would last longer than the turmoil that followed the Asian crisis and the Russian default of the 1990s or the Latin American debt crisis of the 1980s.
Mr Paulson was speaking in Washington as Jean-Claude Trichet, the European Central Bank president, warned that it was time for global financial authorities to tackle unregulated entities whose activities had contributed to the latest upheavals
it sounds to me like dryfly lives on spam, coffee, and donuts (who knows what else). good lord, man; please stand clear when your heart explodes.
Hey bacon - I also eat tofu & will go days without eating meat or junk food... I am truly omnivorous, whatever's available.
When at a truck stop with free wifi, if they have doughnuts I eat doughnuts... If they HAD tofu, I'd eat tofu... just so happens they don't. Big surprise, eh?
And when I'm at Panera I eat real healthy - whole grain breads, low fat veggie soup & salads.
Like I said whatever is available - watch out.
Ummmm however tonight - not so healthy - the wife is at class so I'm making black eyed peas & smoked ham hocks. I'll eat it with rice & green beans.
Barley, I like it! Good thing we have Paulson as THE treasury secretary. Chosen by Bush. He's pretty frank and honest too. 2 months ago - Housing bottomed, crdit issues well contained to subprime, economy's strong...
Dryfly, I know the North Shore of Lake Superior well having spent many a wonderful weekend there pitching a tent in the (now much over crowded) state parks as a younger man. I am much in envy of your friend. (For those not familiar, the North Shore is an area that has much in common with the Pacific Northwest and Northern Idaho - Pine trees, rocky crags, scenic vistas, water, etc.)
However, I think you are right, we are probably about to see another era where lucky people having some resources and lots of intestinal fortitude are going to be able (for a brief time anyways) pick up property at an auction for a song (that will inspire stories like dryfly's for another generation). These folks will, in effect, be able to arbitrage the bank's lack of ability to maintain the properties and their need to firesale the property off their books so as to prevent continuing losses.
I also think that, as dryfly's story indicates, much of the really good deals will be in property that has secondary utility (i.e., cabin/vacation property, condo, house in a marginal urban area, McMansion in an insta-ghost town, etc.) that cannot be lived in by a family as a desirable primary residence and is within easy commute of employment.
Like you said dryfly, if a recession really gets going a lot of folks that get pinched are going to be reducing their unnecessary expenses and dropping property payments as fast as "soiled underwear."
You want to see overbuilding in CRE - go to inland CA, places like Fresneck, Bakersfield, etc. They built so many shopping malls that will never have customers it is ridiculous. Hell, just drive up the 15 from downtown San Diego for 20 min. and hit Rancho Bernardo. Large, empty building formerly occupied by New Century has been sitting there for months with that "for lease" sign dangling. I'm seeing for lease signs for smaller offices in strip malls multiply rapidly.
My plan for CRE is puts on medium sized banks with high CRE exposure. Many of them are already at 52 week lows but will go lower, IMO. One good thing about these banks is the implied volatility is usually low, although some have been creaping up. The difficulty is that the bid/ask is often terrible, so you need to be patient. Quite a few of my banks were down a little today on such a strong day for the markets.
My stategy has been to buy puts on banks with CRE exposure >200% of the level recommended by FDIC. I found these data from Richard Suttemeier. Then I have looked for regional banks that are big enough to have options. If you want to short, you might go for even smaller banks. My banks are in all regions, but now the IBD Southern banks group is the weakest. Quite a few of the banks bounced a couple of weeks ago, so I have added quite a lot to positions on strength. I prefer to buy at or in the money and 3-6 months out. I also have cash for after fed actions, but I expect that a quarter point cut will lead to a flat market or a sell off.
I've held off commenting because I wanted to listen to the smart guys in the room.
Empty offices are part of any rational business model. Nobody runs the spreadsheet at 100 occupancy. The real landlords are not "hurt" merely not as profitable. The speculators are getting creamed as is appropriate.
Geoff You are exactyl right.When I started in business in 1965 interest rates were 6% and constants were 8%. Existing leased projects sold at an 8%cap rate.Spec to be built projects that were done by developers who new what they were doing were done on at least an 8.5%basis. Only a shmuck would do a to be built project on an 8% projected gross return when he could buy an existing rented project on an 8% cap. My point is risk is not being properly priced in todays market. I think commercial realestate is as every bit as over valued as residential.
Empty offices are part of any rational business model. Nobody runs the spreadsheet at 100 occupancy. The real landlords are not "hurt" merely not as profitable. The speculators are getting creamed as is appropriate.
The real problem is too much vacancy means too little pricing power for the landlord.
I don't want to bring up a blast from the past but remember 'priced for perfection'? My guess is more than a few of these CRE deals were priced for better than perfection and now they have less than perfection. Sucks to them...
Why can't we all just live like TRON inside our own personal electronic models... there are never any losses on MY Excel spreadsheets, only better than average gains.
Looks like jim beat me to the punch line - its not a vacancy issue as much as its a pricing issue. Though asking for too high of a rent, enough to cover the cost of the deal, can quickly result in a 'vacancy issue'...
Dryfly, right on.
Worse than priced to perfection. The pricing to perfection model is breaking down. I will relate a simple model and hope not to reveal the client. A graphics design team in a larger organization. I convinced them to buy flat scrrens for 80% of the stations because they saved 4 sq ft per cubicle and hundreds of watts per working hour agaInst the HVAC demand load. The beanaccounters didn't care about productivity or labor rates.
All those saved square feet and "cooling-tons" are hidden CRE deflation.
My favorite pet food store owner just today told me he is closing, out of money and at the end of the lease so he's getting out. He's going to do deliveries only from a much cheaper office and storage location.
Future market opportunities. Hedge funds investing in Chinese surveillance. Since the free market is about to do itself in, everybody should be brushing up on how to win government contracts. A lot of roads and bridges are going to be rebuilt soon. I'm hoping to win the contract for supplying bottled water to the Capitol at $30 bottle (for the Dasani, the Pellegrino is $60 bottle). US hedge-funds wax fat by investing in Chinese surveillance - Boing Boing
Reckon Tishman-Speyer is regretting purchasing the EOP Chicago office portfolio from Blackstone? I would think so. You'd have to think they are nervous about their impending closing on Archstone-Smith that is due to close in early October. The best I can tell, they're paying a 4.25% cap rate for ASN.
I'm sure Macklowe isn't doing much better with the purchase of the Manhattan portfolio from Blackstone.
Haha, Tishman-Speyer... They just got around to changing the signs on the downtown Chicago buildings they bought sometime in the last week. As I walked by a bunch of former EOP properties this summer I kept wondering when they would make the change.
As for the article... All the properties listed are in the NW burbs. In fact all are within 10 or 15 miles of each other. The building that stands out the most to me is Continental Towers. That place took a huge hit back in 2001 when Motorola moved everyone there over to Arlington Heights. Motorola had at least 50% of the complex back then.
As the article mentioned, downtown Chicago has a lot of brand-new office space under construction. It's too early to say how this will turn out. The tall towers all had major tenants locked up before construction - usually large law firms (who probably will do alright in the next few years). Chicago hadn't had much commercial space built in over a decade before this boom, so this may be fulfilling pent-up demand for modern class A space. What's left over... Who knows. Many people are saying that it is driving rents down a bit on the older stuff and making it feasible for a lot of small companies to have a downtown presence. In the building I work in (1920s), this looks to be the case - and some of the companies are moving in from the burbs.
I hope this is a case of the burbs and the speculators getting creamed and not a precursor to the whole Chicago area tanking.
I'm in Chicago too. Had drinks w/ several friends and an acquaintance. The acquaintance is in the CRE business and said that the tenants are just being shuffled... especially law firms. I asked what was being done with the old space they would vacate and his response was "exactly". Said there's bound to be some pain downtown and he said the wake was already rolling down the street for the CRE in the 'burbs. He thinks it'll be "pretty bad", but of course not as bad as Chicago condos. Just think... 3000 more are being built downtown as we speak. Blowout!
Geoff it is a death sentence. Harry Macklowe signed a contract in NY to purchase 7,000,000,000 worth of realestate with 50,000,000 down. Seems he is having difficulty in getting financing.
hopping Centers Begin to Feel Ripples of Housing's Ills
Good catch FFDIC. Mentions CP credit issues too. What a mess.
I have a son working in retail. I keep asking how it is going & he says they keep beating forecast at his store but the company is down a little over all - if so cuts will go everywhere, not just those not making numbers.
Unlikely they'll make cuts until after the Holidays though. We'll know how serious this is then - probably not before.
itsallgreektome- Did you see the identical building going up next to it. They are skinning it now. It should be complete and vacant in 5 months and for the next few years.... Ouch!
"Gamma - I asked what was being done with the old space they would vacate"
few months back we had to relocate our office (2 whole floors) a few blocks as the 55 E Monroe (Chicago) building decided to convert all the floors (I think) 30 up to 42, in to high end condo units. Sounds like an awesome idea with perfectly timed execution
I know a person quite well in CRE and I will say about 3 weeks ago they started acting very panicked and asking me advice about the markets.
Another spin in the death spiral beginning.
Consumers turn to plastic as home loans slow
Consumers turn to plastic as home loans slow
| Reuters
Consumers are carrying a record $907 billion in credit card debt, and that looks likely to jump now that the housing slump has blunted another popular financing tool -- home equity loans.
OK, so I know I sound like a broken record, but buying puts on CFC was obvious with Tangelo at the helm. Who is the enemy who deserves to be punished when commercial real estate comes crashing down? Leona Helmsley's dog?
This is very base (sadly didn't discover CR until the late in the game when the easy money was already made in the 'short the ML/HB' contest and feeling a need to catch up a bit) but does anyone care to share some thoughts/suggestions on good shorts in the CRE space?
--
Pretty soon we will have lots of empty homes (more than now, of course), empty hotel/motel rooms, empty office buildings, etc.
The construction employment, both res and non-res, will be less than 25% of the peak.
Can you spell depression? (We already are in a recession).
Jas
I love you all, because I am heavily long SRS. This will provide me food and drink, when Tanta get even stricter about feeding the trolls.
CRE is officially toast as is condo development. PHX is the canary in the coal mine and the amount of spec buildings in good locations as well as bad is amazing. If it's next to a freeway their building with no tenants in place beyond a title company.
And as bad as RI is here, CRE is gonna be waaay worse.
Ministry of Truth, I know some people in CRE, and they've been telling this cycle will be different, CRE is healthy, the architects are busy, etc.
I pointed out that this cycle might be LATER than usual for two reasons: 1) the slump in CRE following the stock bust might have left more demand, and 2) the residential cycle was so huge it might take longer to get CRE to peak.
But those are arguments for a longer lag between residential and non-residential, not a "it's different this time" cycle.
With the credit crunch, the expected slowdown is probably here.
Best Wishes.
Haps
Do some research on Provident Realty and see what you think. You are going to have to do your own research son. They seem to have put a huge new urban development including hotel on hold at Walnut Hill Lane & Central I75 North in N.Dallas/Preston Hollow. (borders my hood).
Provident Realty :: A Visionary Approach To Success
Lots and lots of empty strip malls and office spaces.
Anecdotal evidence is just that but here is a data point from a friend of a friend who is a small residential property investor:
Inland area of SoCal, primo location, college town, nice well priced house for rent.
One call in one week.
Lots of flippers renting flops, lots of spec purchases leaking through to the rental market.
Point to ponder
Renters rejoice!
Just imagine how the OC office market rents and vacancy assumptions are playing out for investors, based on the expectations they built in when they bought stuff the last couple of years at 4% cap rates. Oh, happy days in CRE are here again. Wonder what those valuation meetings are like and all the imaginary tenants they will think up to fill the empty space. Anything to avoid the reality of what those buildings are really worth. Probably wont get as bad as the SV RE market after the tech bust, but you might get a few see-throughs here and there in time.
1031 HELL
Retirement Funds Vanish as Bankruptcies Hit Tax-Deferred Scheme - Bloomberg.com
In my poorly informed opinion... the CRE bust will be to the 'central states' what Res RE bust is to the coasts. I have no data, proof or anything but what my eyes have seen.
You just can't imagine the CRE build that has and still is going on in such 'densely populated' places like Des Moines, Omaha, Rochester MN, Madison Wis, Minneapolis-St. Paul, St Louis, KC... on and on.
It isn't just Chicago though Chicago subs have been built up frighteningly over the last five years... anyone passing through take a drive out to St Charles, Geneva, Aurora... or up north by McHenry or anywhere in Lake County... it is endless.
Its been just about everywhere.
I can see the coasts supporting some of this build, the people are there. I can even see the Chicago growth being absorbed eventually - Chicago isn't Podunk.
But Des Moines? Rochester MN? Come on, get real.
The coasts might get the R-RE bust worse but the middle will get the C-RE bust worse.
IMHO, anyway.
NEW YORK (Reuters) - Some 57 percent of mortgage broker customers were unable to refinance their adjustable-rate loans to avoid higher monthly payments in August, suggesting the U.S. housing slump may worsen, according to a national survey on Tuesday.
Subprime borrowers had trouble refinancing mortgages because loan programs were no longer available, according to a poll of 1,744 brokers in the last week of August by Campbell Communications, a Washington-based research firm. Prime borrowers were impeded by appraisals and high loan-to-value ratios, it said.
It was posted here several days ago, but to me, this Bloomberg story does one of the best jobs of explaining what'll likely happen to CRE valuations:
Commercial Real Estate in U.S. Poised for Price Drop (Update3) - Bloomberg.com
The CRE valuation bubble may not have gotten as bad as the Residential RE valuation bubble. But it's hard to imagine CRE will emerge from an economic downturn unscathed. Expect stupid CRE loans to sour and reckless CRE speculators to suffer just like their RRE brethren (though I think the magnitude of any CRE downturn will NOT be as severe as what we're seeing in RRE)
I think the article title should have been "Empty Offices Leave High Landlords Dry" given what these landlords were paying for existing and/or new spec construction. Remember, if it seems too pricey and risky, it probably is.
one thing I have noticed is many real estate related tenants moving into "main street" locations- brokers, mortgage companies, etc. in what would otherwise be prime small retail spots. I don't foresee this lasting much longer.
In Fredericksburg, Va. on Lafayette Boulevard, there is a new strip mall, 18 store fronts, a work in progress for two plus years, the 18 storefronts were completed eight months ago, billed as condo commercial originally, and are all vacant today, for sale or lease.
It was about two years ago that I went to Waldorf, Md. and discovered a sudden explosion of For Sale signs, when the housing market had been: list today, sell tomorrow, dont bother with a For Sale sign. Six months later the For Sale signs were all over Washington, DC.
The five quarter delay works just like how things expand from the inside out and collapse from the outside in.
The commercial collapse in Virginia is moving right up I95 north to Arlington and Alexandria. And any MSM or ivory tower observers notice of this will be after the fact.
Financial executives weigh in on credit crunch at Lehman confab - MarketWatch
Various banking execs talking at the Lehman Brothers conference.
Some "we aren't exposed, but our competitors are" comments.
dryfly, interesting view - and probably correct (as usual!).
I think CRE will take a hit on the coasts too, but vacancy rates are pretty low in most coastal areas - so it's the new supply coming on line that is the biggest problem. For areas like the Chicago suburbs, CRE is already in deep trouble.
Mike_in_Fl, I'm interested in seeing the FDIC "Emerging Risks" report due out in November. There was a heavy concentration in CRE for mid-sized institutions last year - and if CRE slumps, we will probably see a lot of institutions in trouble. It won't be as bad as the '80s, but CRE defaults could make the credit crunch worse.
Best to all.
Re: shorts in CRE space
CSGP and LOOP are listing services specifically for commercial properties; they depend on commercial real estate brokers for their business. CSGR is the big established player. LOOP is the high-flying start-up "category killer", and is therefore probably both more lucrative and more dangerous as a short.
I suppose you could short anything from roofing to carpet to wallboard, but those stocks have largely been hammered already thanks to residential.
There are probably some public commercial builders and contractors, but I do not know them.
And remember: Always look to anonymous people on the Internet for investment advice
Anecdotal from my point of view -- Commercial real estate in the Detroit has been growing like Topsy over the last couple years, while residential real estate and the auto industry have been in a severe recession. This will not end well...
FFDIC: Thanks and will heed the DD advice. Certainly their motto 'Visionary Approach' makes them worth a double-take.
"Always look to anonymous people on the Internet for investment advice"
The thing I like best about getting advice from anonymous people on the internet is that you don't normally have to give them custody of your assets.
That 1031 link above is awesome.
North Scottsdale/Phoenix is ridiculous. Alec said it, and so has the someday this war is gonna end guy.
It's truly unbelievable the amount of building going on - and no chance of anyone moving in.
My favorite development is next to the Indian Casino at Indian Bend. Tons of new space.
Went to 100% money market in 401k last night.
Bring on the 20% stock market drop!
Please enlighten me someone who knows CRE: I would expect that businesses would move out of offices faster than people move out of houses. I would think it is easier for a business to go BK than a person.
The latest on Toast Bank:
Speculation abounds after Toast executive sells stock holdings...
Speculation abounds after Coast executive sells stock holdings | HeraldTribune.com | Sarasota Florida | Southwest Florida's Information Leader
The CRE landscape is different than the last bust in '01 because there has not been an inane run up in office rents. Some cities still haven't come close to '01 prices. Buildings have increased in value because people have lowered their cap rates to match that of other various yields, albeit most other products are more liquid. But at least we didn't have the nominator increasing while the denominator was decreasing. As CR said the real threats will be in over supply and BK'd tenants. Oh... and maybe a small problem with financing
Oddly enough, the stuff on the Indian land is probably best positioned. The Salt River Tribe controls the land co-developed. No prop. taxes, easy access, can't be undercut in a downturn. makes the pain farther north on the 101 that much worse.
FFDIC,
Thanks for all the awesome links.
Haps,
Richard Suttmeir keeps track of all the banks heavily exposed to CRE.
He can be found on rightside.com
Some of his favorite shorts are:
BBT,CNB,GGP. But they could change any day. Its better to read his commentary regularly.
Geoff: your comment says it all. 4% caps? Sounds exactly like the bay area market to me. Where was their common sense? Their valuation models must be real works of fantasy. Jesus, this is going to be a big mess. Thanks again, Alan GreedScam.
"based on the expectations they built in when they bought stuff the last couple of years at 4% cap rates"
CBL, YSI, GGP, any mortgage REIT like RAS etc.
1031 Hell?
Retirement Funds Vanish as Bankruptcies Hit Tax-Deferred Scheme - Bloomberg.com
Do not fear, this is one that will get bailed out. I can smell 'well connected politically.
FT.com - Dollar hits fresh 15 year low
FT.com / Currencies - Dollar hits fresh 15-year low
Please enlighten me someone who knows CRE: I would expect that businesses would move out of offices faster than people move out of houses.
I'm a small biz guy who has at times 'officed outside the home'... and when things get tough I've dropped my leases like soiled underwear - that fast.
On top of that I've never been forced to sell the house... and I've seen my income fall 80% before...
Plus this strategy has enabled me to survive three recessions as a result of getting out of bad situations very fast.
So 'ya' I think your assumption & generalization is correct.
Currently I try to make wherever my laptop & cellphone is my office... Might be my home, might be Panera in Madison or a truckstop on I 35. The rent can't be beat... cup of coffee and a doughnut.
When Flying to Quality, Be "In the Bank"
When Flying to Quality, Be "In the Bank" -- Seeking Alpha
The above "When Flying to Quality, Be In the Bank" should have been posted under the Countrywide thread. It's an excellent read about banks, bank holding co. & FDIC. All important to know in the event of bank failure when it's far too late to change anything legally.
--
People need to dig up and read reports from Silly.con Valley during 2001-03:
Total Employment fell MORE THAN 20% in Santa Clara County.
Office Vacancy Rate was more than 35%
And Apartment Rents fell 35-45%.
It was a short-lived depression. The area residents got saved by the Housing Bubble that began there in 2004. Next time around there would be no more bubbles to save the residents. And the depression would be nationwide.
Jas
Here's another item that may cloud commercial real estate: an implosion among 1031 exchange companies. Some went belly-up, taking their real estate investors' pseudo-escrow money with them.
Retirement Funds Vanish as Bankruptcies Hit Tax-Deferred Scheme - Bloomberg.com
Transactions must be handled by so-called qualified intermediaries like 1031 exchanges, which have temporary custody of about $150 billion a year, an industry group says. They are unregulated in all but one state.
The bankrupt firms' owners are accused of using client funds to invest in other businesses, emptying bank accounts of more than $250 million. No criminal charges have been filed.
...
Most customers, including Slotten, also lost the chance to buy property they sought. She planned to acquire two new buildings housing Walgreen Co. drugstores and live off the revenue. Instead, she returned to her job as a real estate broker and is taking finance classes to enter a new field.
...
``The problem has put a pall over these types of transactions,'' said Michael Machado, a California state senator who proposed state regulation to prevent bilking of investors.
I don't think it's too late to short Corus Bankshares (CORS) even though they have dropped 50% since January.
They have the heaviest exposure to Florida condo lending and big condo lending exposure in general. Also, they have a relatively small Chicago-based branch network and may have some CRE exposure in Chicago.
They sold high yield 1-year CDs on the Internet to raise deposits, and a lot of that money is hot and will go elsewhere as their yields fall.
7.1% dividend may be cut.
dryfly,
I think you are probably correct about some mid-american cities. I lived in Rochester and I'd bet that total CRE footage probably tripled from the early '80s to now... but population probably went up 50% or 60%. Of course, there is a lot more immigration to that part of the country than you would expect. But, still...
FFDIC,
Thanks for all the awesome links.
Ditto
We've done some some 1031's--never thought about that risk
OT on residential RE:
San Diego August NOD (defaults) and NOT (foreclosures) data is out. First link is the data, 2nd is a labor-force adjusted chart:
InnoVest's Foreclosure Forum
Piggington's Econo-Almanac | San Diego Housing Bubble News and Analysis
There is a 3 month lag between default and foreclosure, so at a 50% flow-through rate we should see about 1200 REO's/month by year end.
That's about 50% of existing home sales for the county.
BTW, there are some double counting issues with 2nd lien defaults, but Rich Toscano looked into the % of 2nd defaulted liens and found them to be low. Apparently its less costly to just write off the 2nd liens than to begin the foreclosure process on them.
Here comes the sarcasm.
How are we going to tame our Trade Deficit if we don't keep building offices?
OT slightly, but yikes!
"Massive Motown foreclosure auction
Nearly 700 homes will be sold during a three-day auction in Detroit."
...
""Buyers set the prices," said Crystal Wright, spokeswoman for Hudson & Marshall, "but it's a reserve auction [for the most part]; sellers have the right to accept or reject the bid."
In past auctions, winning bids were accepted 92 percent of the time. Some houses are listed "absolute," meaning any bid will be accepted.
"[In some cases] the sellers have indicated that any bid will be OK," said Webb. "It's costing them too much. Even if a house brings just $100, they'll still have to sell it."
Whoops.. The link.
Massive Motown foreclosure auction - Sep. 11, 2007
Andrew,
Have you ever considered a career in the horror movie business? Your words scare the @#$% out of me!
Thanks for the link Andrew. I hope everything sells and my property taxes go down accordingly...
StagflationaryMark - "Have you ever considered a career in the horror movie business? Your words scare the @#$% out of me!"
LOL. Nope, no one has ever said that to me before. However, an Art Professor in undergrad once told me I might make a good pop-artist (think Andy Warhol of Campbell Soup Can fame).. Heh, I try to make a meaningful contribution in society and all I seem to have a talent for is schlock. Oh well.
mike in florida I don't agree.If you purched a commercial building last year at a 5.5% cap rate and three years later cap rates return to a more rational level of say 8%,you are down 30% before taking into consideration any rent increases that may have taken place. And given the level of spec building under construction this might be a very small number.
I've seen a trend in retail/restaurant CRE over the past decade, companies building new stores even where there was no demand growth -- just to gain competitive turf and scale.
For example, there are four pizza chain stores within a square mile, but one chains builds two new stores in the same area, just so they can cluster business and drive out competition. (Only the competition is still there.)
Way too much retail/restaurant space and employment.
dryfly!
The rent can't be beat... cup of coffee and a doughnut.
Are you sure you are even paying the rent?
Who drinks the coffee?
Who eats the doughnut?
I suspect your landlord is getting shafted.
Jim - 5.5% to 8% all else equal is a death sentence. You only need to go 5 to 6% and add a marginally higher vacancy rate and a wee bit weaker rent growth to require a trip to the ER.
Banks Sell Part of Allison Loan
Even after cutting their losses, the banks aren't off the hook yet. The loans now off their books were just one part of a $3.5 billion loan package.
The fact that the banks were only able to unload a portion of the Allison loans doesn't augur well for deals involving lesser credits.
"I was surprised that $1 billion of the deal was all they can scrape together," said Justin Monteith at KDP Investment Advisors. "It's sort of sad, too, because it's a much better company and a much better leverage situation" than other companies with deals pending in the pipeline, and "everyone's known about this deal for a while."
Yep, it's sort of sad, alright. The sordid state of global finance, that is.
Andrew - I met a guy who bought a house at an auction in the 80s bust... 'absolute, zero reserve bank auction' where his bid was the only bid.
He bid on a new 3 br, five acre home on the North Shore by Little Marais-Tofte... about a half mile off the highway with a clear view of Lake Superior from his deck through mature Norway pine, birch & aspen and with a Class I trout stream running through the property.
Now you are from the region - care to guess how much that would go for now? Half a million maybe? More? I have no idea but know it would be a lot. Even in 80s dollars a contractor friend of his guessed the original owner had at least $125K in it - just the house!!
He bid $8K and won it - NOBODY wanted real estate, especially second home real estate, back then.
Now Detroit isn't the North Shore... but I'm thinking we could be getting to that same mind set here pretty quick... give this thing a year or so more to work on people's paranoia.
Who drinks the coffee?
Who eats the doughnut?
Mark - if you saw my waistline you'd know who was eatin' the doughnuts. Rent wouldn't be cheaper but it might be healthier.
OT but worth noting:
FT.com / US & Canada - No quick end to turmoil, says Paulson
No quick end to turmoil, says Paulson
By Eoin Callan and Jeremy Grant in Washington and Tony Barber in Brussels
Published: September 11 2007 22:31 | Last updated: September 11 2007 22:31
The crisis of confidence in credit markets is likely to last longer than any of the financial shocks of the past two decades, Hank Paulson, Treasury secretary, warned on Tuesday.
He said the uncertainty in credit markets would last longer than the turmoil that followed the Asian crisis and the Russian default of the 1990s or the Latin American debt crisis of the 1980s.
Mr Paulson was speaking in Washington as Jean-Claude Trichet, the European Central Bank president, warned that it was time for global financial authorities to tackle unregulated entities whose activities had contributed to the latest upheavals
it sounds to me like dryfly lives on spam, coffee, and donuts (who knows what else). good lord, man; please stand clear when your heart explodes.
it sounds to me like dryfly lives on spam, coffee, and donuts (who knows what else). good lord, man; please stand clear when your heart explodes.
Hey bacon - I also eat tofu & will go days without eating meat or junk food... I am truly omnivorous, whatever's available.
When at a truck stop with free wifi, if they have doughnuts I eat doughnuts... If they HAD tofu, I'd eat tofu... just so happens they don't. Big surprise, eh?
And when I'm at Panera I eat real healthy - whole grain breads, low fat veggie soup & salads.
Like I said whatever is available - watch out.
Ummmm however tonight - not so healthy - the wife is at class so I'm making black eyed peas & smoked ham hocks. I'll eat it with rice & green beans.
Thank God for Lipitor.
Barley, I like it! Good thing we have Paulson as THE treasury secretary. Chosen by Bush. He's pretty frank and honest too. 2 months ago - Housing bottomed, crdit issues well contained to subprime, economy's strong...
Will he make it to 2008?
Hey everyone, check out this chart over at BigPicture:
Employment Population Ratio & Recessions
Thank God for Lipitor.
better living through chemistry, that's my philosophy...
Sure it isn't all that Hy-Vee meatloaf, dryfly?
Dryfly, I know the North Shore of Lake Superior well having spent many a wonderful weekend there pitching a tent in the (now much over crowded) state parks as a younger man. I am much in envy of your friend. (For those not familiar, the North Shore is an area that has much in common with the Pacific Northwest and Northern Idaho - Pine trees, rocky crags, scenic vistas, water, etc.)
However, I think you are right, we are probably about to see another era where lucky people having some resources and lots of intestinal fortitude are going to be able (for a brief time anyways) pick up property at an auction for a song (that will inspire stories like dryfly's for another generation). These folks will, in effect, be able to arbitrage the bank's lack of ability to maintain the properties and their need to firesale the property off their books so as to prevent continuing losses.
I also think that, as dryfly's story indicates, much of the really good deals will be in property that has secondary utility (i.e., cabin/vacation property, condo, house in a marginal urban area, McMansion in an insta-ghost town, etc.) that cannot be lived in by a family as a desirable primary residence and is within easy commute of employment.
Like you said dryfly, if a recession really gets going a lot of folks that get pinched are going to be reducing their unnecessary expenses and dropping property payments as fast as "soiled underwear."
You want to see overbuilding in CRE - go to inland CA, places like Fresneck, Bakersfield, etc. They built so many shopping malls that will never have customers it is ridiculous. Hell, just drive up the 15 from downtown San Diego for 20 min. and hit Rancho Bernardo. Large, empty building formerly occupied by New Century has been sitting there for months with that "for lease" sign dangling. I'm seeing for lease signs for smaller offices in strip malls multiply rapidly.
This is gonna get realllllly ugly.
with the baby boomers retiring and nternet2. Who needs all that space.
Internet2 - Wikipedia, the free encyclopedia
Ministry of Truth:
My plan for CRE is puts on medium sized banks with high CRE exposure. Many of them are already at 52 week lows but will go lower, IMO. One good thing about these banks is the implied volatility is usually low, although some have been creaping up. The difficulty is that the bid/ask is often terrible, so you need to be patient. Quite a few of my banks were down a little today on such a strong day for the markets.
Sure it isn't all that Hy-Vee meatloaf, dryfly?
Ya that too - LOL. And thanks for the link to the Employment Ratio - very good.
My stategy has been to buy puts on banks with CRE exposure >200% of the level recommended by FDIC. I found these data from Richard Suttemeier. Then I have looked for regional banks that are big enough to have options. If you want to short, you might go for even smaller banks. My banks are in all regions, but now the IBD Southern banks group is the weakest. Quite a few of the banks bounced a couple of weeks ago, so I have added quite a lot to positions on strength. I prefer to buy at or in the money and 3-6 months out. I also have cash for after fed actions, but I expect that a quarter point cut will lead to a flat market or a sell off.
Empty Offices Hurting Landlords
I've held off commenting because I wanted to listen to the smart guys in the room.
Empty offices are part of any rational business model. Nobody runs the spreadsheet at 100 occupancy. The real landlords are not "hurt" merely not as profitable. The speculators are getting creamed as is appropriate.
Geoff You are exactyl right.When I started in business in 1965 interest rates were 6% and constants were 8%. Existing leased projects sold at an 8%cap rate.Spec to be built projects that were done by developers who new what they were doing were done on at least an 8.5%basis. Only a shmuck would do a to be built project on an 8% projected gross return when he could buy an existing rented project on an 8% cap. My point is risk is not being properly priced in todays market. I think commercial realestate is as every bit as over valued as residential.
Empty offices are part of any rational business model. Nobody runs the spreadsheet at 100 occupancy. The real landlords are not "hurt" merely not as profitable. The speculators are getting creamed as is appropriate.
The real problem is too much vacancy means too little pricing power for the landlord.
I don't want to bring up a blast from the past but remember 'priced for perfection'? My guess is more than a few of these CRE deals were priced for better than perfection and now they have less than perfection. Sucks to them...
Why can't we all just live like TRON inside our own personal electronic models... there are never any losses on MY Excel spreadsheets, only better than average gains.
Looks like jim beat me to the punch line - its not a vacancy issue as much as its a pricing issue. Though asking for too high of a rent, enough to cover the cost of the deal, can quickly result in a 'vacancy issue'...
Dryfly, right on.
Worse than priced to perfection. The pricing to perfection model is breaking down. I will relate a simple model and hope not to reveal the client. A graphics design team in a larger organization. I convinced them to buy flat scrrens for 80% of the stations because they saved 4 sq ft per cubicle and hundreds of watts per working hour agaInst the HVAC demand load. The beanaccounters didn't care about productivity or labor rates.
All those saved square feet and "cooling-tons" are hidden CRE deflation.
OT:
But to great a read to pass up:
Fingers V : Financial Meltdown, aka Systemic Heart Attack ! by Ty Andros
My favorite pet food store owner just today told me he is closing, out of money and at the end of the lease so he's getting out. He's going to do deliveries only from a much cheaper office and storage location.
He won't be the only one.
Future market opportunities. Hedge funds investing in Chinese surveillance. Since the free market is about to do itself in, everybody should be brushing up on how to win government contracts. A lot of roads and bridges are going to be rebuilt soon. I'm hoping to win the contract for supplying bottled water to the Capitol at $30 bottle (for the Dasani, the Pellegrino is $60 bottle).
US hedge-funds wax fat by investing in Chinese surveillance - Boing Boing
Reckon Tishman-Speyer is regretting purchasing the EOP Chicago office portfolio from Blackstone? I would think so. You'd have to think they are nervous about their impending closing on Archstone-Smith that is due to close in early October. The best I can tell, they're paying a 4.25% cap rate for ASN.
I'm sure Macklowe isn't doing much better with the purchase of the Manhattan portfolio from Blackstone.
donna
Guess you are gonna have to go back to people food now.
Did anyone expect the market to go down on 9/11?
They are going to stop "calculating NAV", taking a little break from reality, while halting redemptions-
Y2K Finance Hedge Fund Halts Redemptions and Sales (Update4) - Bloomberg.com
tanta-
this has absolutely GOT to be a first-
News Releases
For the first time ever there was a radio commercial for Hovnanian homes.
Best prices ever,free upgrades, etc..., I wonder what that means?
Also, at the local Vons Grocery store, even cheap deodorants had
electronic security tags! I wonder...
The local biglots and Rockymountain
chocolate factory closed their locations. I am in Los Angeles. I wonder....
Please don't tell me how wonderful I am.
The London Telegraph is already coming out with WWII & Depression era tips for saving money "50 ways to be more frugal" while the rich live it up...
50 ways to be more frugal - Telegraph
Haha, Tishman-Speyer... They just got around to changing the signs on the downtown Chicago buildings they bought sometime in the last week. As I walked by a bunch of former EOP properties this summer I kept wondering when they would make the change.
As for the article... All the properties listed are in the NW burbs. In fact all are within 10 or 15 miles of each other. The building that stands out the most to me is Continental Towers. That place took a huge hit back in 2001 when Motorola moved everyone there over to Arlington Heights. Motorola had at least 50% of the complex back then.
As the article mentioned, downtown Chicago has a lot of brand-new office space under construction. It's too early to say how this will turn out. The tall towers all had major tenants locked up before construction - usually large law firms (who probably will do alright in the next few years). Chicago hadn't had much commercial space built in over a decade before this boom, so this may be fulfilling pent-up demand for modern class A space. What's left over... Who knows. Many people are saying that it is driving rents down a bit on the older stuff and making it feasible for a lot of small companies to have a downtown presence. In the building I work in (1920s), this looks to be the case - and some of the companies are moving in from the burbs.
I hope this is a case of the burbs and the speculators getting creamed and not a precursor to the whole Chicago area tanking.
I'm in Chicago too. Had drinks w/ several friends and an acquaintance. The acquaintance is in the CRE business and said that the tenants are just being shuffled... especially law firms. I asked what was being done with the old space they would vacate and his response was "exactly". Said there's bound to be some pain downtown and he said the wake was already rolling down the street for the CRE in the 'burbs. He thinks it'll be "pretty bad", but of course not as bad as Chicago condos. Just think... 3000 more are being built downtown as we speak. Blowout!
NY Times
Shopping Centers Begin to Feel Ripples of Housing's Ills
SQUARE FEET; Shopping Centers Begin to Feel Ripples of Housing's Ills - NY Times
Geoff it is a death sentence. Harry Macklowe signed a contract in NY to purchase 7,000,000,000 worth of realestate with 50,000,000 down. Seems he is having difficulty in getting financing.
hopping Centers Begin to Feel Ripples of Housing's Ills
Good catch FFDIC. Mentions CP credit issues too. What a mess.
I have a son working in retail. I keep asking how it is going & he says they keep beating forecast at his store but the company is down a little over all - if so cuts will go everywhere, not just those not making numbers.
Unlikely they'll make cuts until after the Holidays though. We'll know how serious this is then - probably not before.
Law.com
Real Estate Deals Are Feeling the Credit Pinch
Law.com - Real Estate Deals Are Feeling the Credit Pinch
itsallgreektome- Did you see the identical building going up next to it. They are skinning it now. It should be complete and vacant in 5 months and for the next few years.... Ouch!
"Gamma - I asked what was being done with the old space they would vacate"
few months back we had to relocate our office (2 whole floors) a few blocks as the 55 E Monroe (Chicago) building decided to convert all the floors (I think) 30 up to 42, in to high end condo units. Sounds like an awesome idea with perfectly timed execution