There are so many deals falling apart,'' said David Lichtenstein, chief executive officer of Lakewood, New Jersey- based Lightstone Group, an owner of more than 20,000 apartments and 30 million square feet of office and retail space.People who can get out are getting out.''
Poised? What an interesting way to describe the potential fall.
I never did mind the little things. - Bridget Fonda, Point of No Retur
The stock market tracks the Yen. Go to Yahoo and plot the Yen versus the Dow. The curves overlap.
Personally, I believe that the stock market currently works like this.
Very big players realize that there is a cohort of investors who are dead terrified of being "left behind". This is the group who believe that 1987 represented the greatest buying opportunity since the Great Depression. It is these investors who are joined at the waist with the concept of "momentum".
On a day to day basis, big, big players juice the indices with dollars bought with borrowed yen, i.e. infinite leverage or "no cost" leverage if you will.
The "momentum" investors, seeing the movement induced by the juice from the big players hop on board and move the indices higher. When they get enough of a bounce, the big players sell into the bounce...never enough to scare anyone, but definitely enough to make garganuan profits on their free dollars.
And sometimes, the momentum investors just take over and move things higher.
TIAA is universities and research institutions, not public school teachers. They are very conservative, so you will see a steep recession before TIAA_CREF feels pressures.
We still have gym teachers? I thought we got rid of all of them in the No Child Left Undrilled To Pointless Tests thingy.
Maybe all the former gym teachers can band together with the former band teachers, not to mention the drama teachers, art teachers, and Latin teachers, and start a Has Been Revolution. I doubt the nuns are in TIAA, but you know some of them would be good for a little solidarity and quite a few of the ones I've known could go toe-to-toe with any gym teacher out there.
The fall in CMBS demand is not just an American phenomenon. The Financial Times reported today that the Reserve Bank of Scotland estimates that European issuance of commercial mortgage-backed securities was just EU1.5bn (£1bn) in July, compared with EU14.6bn the previous month and EU11.3bn in July 2006 - and spreads have risen.
Issuing commercial mortgages, apparently, is all fun and games until you have to hold the loans on your own balance sheet.
Okay, here is an anecdote pointing to a recession next year, for what it's worth.
Major media corporation, located in the southeast, has hiring freeze. No one getting hired, contract/temp or perm. This is despite next year being a presidential election, when ad sales typically do quite well for the networks due to heavy ad buying by both parties.
Sentinel last month blamed its inability to meet client redemptions on the liquidity crisis in the markets at the time. But the SEC says the claim was false and has accused Sentinel in a lawsuit of fraudulently mixing up funds in three separate - so-called segregated - client accounts with each other and with its own "house" account.
Creditors associated with one of the accounts - known as "seg one" - received most of their money back after Citadel agreed to buy certain assets.
Our friends from forensic accounting, sharpen your pencils! Your time is nigh.
The nice thing, I suppose, is that every job created is really two jobs:
Dan Roth, president of the National Futures Association, the self-regulatory organisation for the futures industry, said the NFAhad discovered a $505m shortfall in Sentinel's books. About $440m was missing from "seg three", while about $65m applied to "seg one".
But he said nothing had so far indicated that there had been any "depletion" of seg three funds to benefit seg one customers. "Seg three funds were not diverted," he said.
Asked about the SEC's suspicion that there may have been such a diversion, Mr Roth said: "I'm not aware that they have any hard information to support that conclusion.
I imagine that the best firms can support two business divisions: PRO and CON!
Interesting. A friend whose is a commercial real estate attorney for a large east coast firm has been a lot less busy than she used to be. I asked her what was going on about three months ago and recieved a non-commital reply.
I mentioned the last commericial RE crash here known as the "time of the see-through buildings" and got the deer in the headlights look and dropped it.
Suntrust announced the layoff plans but I heard about them three months ago from a senior staff member who is personally worried and rightfully as he is on the wrong side of the age and value to cost equation now.
Methinks that perhaps about four months ago or so the internal numbers began to turn noticablly.
It's not surprising to see commercial real estate start to roll over. With the economy starting to weaken (today's ADP report, Challenger report, etc.) and retail sales poised to slow, you'd expect demand growth for office and retail space to slow.
Then there's the whole valuation issue. The "flipping" phenomenon wasn't just confined to residential real estate. There's been plenty of baseball-card-like trading of commercial property, too. Some of these deals have incorporated ... shall we say ... "generous" assumptions about underlying fundamentals, and have used increasingly risky financing methods. As money gets tighter and the economy slows, those deals are increasingly going to be at risk, as the Bloomberg story chronicles.
Mike, those deals were starting to look generous right out of the gate after the last commercial property slump. No matter what question you might come up with about potential vacancy rate issues, or supply issues leading to rental rate assumptions that might be too generous, there was always the cap rate squeeze to pull you through. And to think it went on nearly three more years, compressing the whole time, to the point where the returns are less than cash and the rent roll assumptions are priced for perfection. No way this doesnt end ugly.
US auto sales strong despite credit crunch
from bloomberg:
Commercial Real Estate in U.S. Poised for 15 Percent Price Drop
ecc,
There are so many deals falling apart,'' said David Lichtenstein, chief executive officer of Lakewood, New Jersey- based Lightstone Group, an owner of more than 20,000 apartments and 30 million square feet of office and retail space.People who can get out are getting out.''
Poised? What an interesting way to describe the potential fall.
I never did mind the little things. - Bridget Fonda, Point of No Retur
But the stock market keeps levitating. Who are the people who keep it doing that?
Chris,
The stock market tracks the Yen. Go to Yahoo and plot the Yen versus the Dow. The curves overlap.
Personally, I believe that the stock market currently works like this.
Very big players realize that there is a cohort of investors who are dead terrified of being "left behind". This is the group who believe that 1987 represented the greatest buying opportunity since the Great Depression. It is these investors who are joined at the waist with the concept of "momentum".
On a day to day basis, big, big players juice the indices with dollars bought with borrowed yen, i.e. infinite leverage or "no cost" leverage if you will.
The "momentum" investors, seeing the movement induced by the juice from the big players hop on board and move the indices higher. When they get enough of a bounce, the big players sell into the bounce...never enough to scare anyone, but definitely enough to make garganuan profits on their free dollars.
And sometimes, the momentum investors just take over and move things higher.
I guess the fundamental concept is that if there is free money, assets will approach infinite valuations.
Of course, one could ask the question, "Why are yen free?"
I daresay that the answer to that question would make corruption in Iraq look like pocketing a few coins from the collection plate on Sunday morning.
The shoe that is going to drop at some point is TIAA.
TIAA (TIAA-CREF - Page Not Found invests the retirement funds of all the teachers in the U.S. in...the envelope please...commercial real estate.
If TIAA ever says to its clients, "Uh, we don't really have enough money to pay you your retirement checks this week," there will be a revolution.
Citigroup reportedly has $100 billion in SIVs
Citigroup reportedly has $100 billion in SIVs - MarketWatch
If TIAA ever says to its clients, "Uh, we don't really have enough money to pay you your retirement checks this week," there will be a revolution.
You are referring to the most bullied and least valued class of professionals in America.
If they were to attempt a revolution, the booboisie would relish crushing them. With their awful children at their side!
The gym teachers might put up some resistance. But come on.
The next shoe-
Distressed Bonds Increase Most Since 2003, Led by WCI (Update1) - Bloomberg.com
TIAA is universities and research institutions, not public school teachers. They are very conservative, so you will see a steep recession before TIAA_CREF feels pressures.
The gym teachers might put up some resistance.
We still have gym teachers? I thought we got rid of all of them in the No Child Left Undrilled To Pointless Tests thingy.
Maybe all the former gym teachers can band together with the former band teachers, not to mention the drama teachers, art teachers, and Latin teachers, and start a Has Been Revolution. I doubt the nuns are in TIAA, but you know some of them would be good for a little solidarity and quite a few of the ones I've known could go toe-to-toe with any gym teacher out there.
The fall in CMBS demand is not just an American phenomenon. The Financial Times reported today that the Reserve Bank of Scotland estimates that European issuance of commercial mortgage-backed securities was just EU1.5bn (£1bn) in July, compared with EU14.6bn the previous month and EU11.3bn in July 2006 - and spreads have risen.
Issuing commercial mortgages, apparently, is all fun and games until you have to hold the loans on your own balance sheet.
cp fallout-
Cheyne Capital Short-Term Debt Unit Appoints Receiver (Update1) - Bloomberg.com
libor move-
ECB Says May Act If Money-Market Volatility Persists (Update2) - Bloomberg.com
Okay, here is an anecdote pointing to a recession next year, for what it's worth.
Major media corporation, located in the southeast, has hiring freeze. No one getting hired, contract/temp or perm. This is despite next year being a presidential election, when ad sales typically do quite well for the networks due to heavy ad buying by both parties.
Lay-offs surge 85 percent in Aug vs July: survey
Expired
OT, but we don't want to overlook the next major growth industry:
<a href=http://www.ft.com/cms/s/0/e5cad736-5b49-11dc-8c32-0000779fd2ac.html">Sentinel's $500m shortfall
Sentinel last month blamed its inability to meet client redemptions on the liquidity crisis in the markets at the time. But the SEC says the claim was false and has accused Sentinel in a lawsuit of fraudulently mixing up funds in three separate - so-called segregated - client accounts with each other and with its own "house" account.
Creditors associated with one of the accounts - known as "seg one" - received most of their money back after Citadel agreed to buy certain assets.
Our friends from forensic accounting, sharpen your pencils! Your time is nigh.
The nice thing, I suppose, is that every job created is really two jobs:
Dan Roth, president of the National Futures Association, the self-regulatory organisation for the futures industry, said the NFAhad discovered a $505m shortfall in Sentinel's books. About $440m was missing from "seg three", while about $65m applied to "seg one".
But he said nothing had so far indicated that there had been any "depletion" of seg three funds to benefit seg one customers. "Seg three funds were not diverted," he said.
Asked about the SEC's suspicion that there may have been such a diversion, Mr Roth said: "I'm not aware that they have any hard information to support that conclusion.
I imagine that the best firms can support two business divisions: PRO and CON!
Interesting. A friend whose is a commercial real estate attorney for a large east coast firm has been a lot less busy than she used to be. I asked her what was going on about three months ago and recieved a non-commital reply.
I mentioned the last commericial RE crash here known as the "time of the see-through buildings" and got the deer in the headlights look and dropped it.
Suntrust announced the layoff plans but I heard about them three months ago from a senior staff member who is personally worried and rightfully as he is on the wrong side of the age and value to cost equation now.
Methinks that perhaps about four months ago or so the internal numbers began to turn noticablly.
Tanta,
come on now, drama teachers? Art? Band? I would pay to see that revolution.
If the PE teachers are smart they will get the Ag teachers and shop department. It would be a real coup to get the photojournalism teacher too.
It's not surprising to see commercial real estate start to roll over. With the economy starting to weaken (today's ADP report, Challenger report, etc.) and retail sales poised to slow, you'd expect demand growth for office and retail space to slow.
Then there's the whole valuation issue. The "flipping" phenomenon wasn't just confined to residential real estate. There's been plenty of baseball-card-like trading of commercial property, too. Some of these deals have incorporated ... shall we say ... "generous" assumptions about underlying fundamentals, and have used increasingly risky financing methods. As money gets tighter and the economy slows, those deals are increasingly going to be at risk, as the Bloomberg story chronicles.
Mike, those deals were starting to look generous right out of the gate after the last commercial property slump. No matter what question you might come up with about potential vacancy rate issues, or supply issues leading to rental rate assumptions that might be too generous, there was always the cap rate squeeze to pull you through. And to think it went on nearly three more years, compressing the whole time, to the point where the returns are less than cash and the rent roll assumptions are priced for perfection. No way this doesnt end ugly.
Steve,
Did you actually read that article?
Last night I spoke with a friend who works at Countrywide Lending, San Jose, Willow Glen office. It's already begun...6 laid off late last week.
Tortured english is a sign of duress.
Translation: Any hard information they do have was not given to them by me.
Simplification: I am not a (The?) whistleblower.
Will we employ enough lawyers to avoid recession?