You have to read to page 3 of the linked article to understand the most important point:
"There's more lifestyle centers out there for sale than we've seen in the past," David Simon said. "I think the floodgates of that is just going to begin to open ... We're going to end up dealing with the construction lender."
David Simon is saying: "There's no point to building new traditional shopping malls. We'll just wait and let malls now in construction default and we'll vulture them."
Goodbye to new mall construction for awhile, like the next decade of so.
If possible can someone please let me know of a website that provides free credit default swap spreads / quotes, because I am an individual investor who does not have access to a Bloomberg machine and does not know how else to access this information. Thanks in advance.
Also, to Calculated Risk, can you please show an updated abx and/or cmbx chart and give your insights on it when you have a chance? It would be much appreciated.
what the hell is a "lifestyle center". Does it have personal shoppers, massage therapists and valet parking to go to Starbucks and visit the baristas???
golden times - you can find the charts - COB, on markit.
Interesting article. Availability of financing particularly to refi maturing CMBS issues is going to be critical. Unless this market and other credit markets come back there is going to be a crunch in CRE. Here's what I wrote a couple of weeks ago-http://blog.metro-real-estate.com/?p=345
Re: "Commercial Real Estate: "The problems are in all of it"'
I hope the following chart link works, as sometimes they don't, but should it appear on your screen, it represents a fine example of two things: First, bubbles come and go and second, once a bubble does pop, the balloon remains busted. Thus, as in previous bubbles, the current housing bubble is not likely to be fixed any time soon! The only people that made money, are long gone and the only thing to be done now is sift through the ashes and accept reality and move on to another game.
Sbarrkum, thanks for the links. I'm not a trader, I just wanted some basic info on cds. But I did not see how to get spreads for specific companies, so if possible can you let me know how to get those?
Here in Los Gatos (Silicon Valley), a stretch of University Avenue 1/2 mile from downtown sprouted half a dozen brand new office buildings around the time of the Tech Bubble. Recently I have noticed "Space Available" signs in front of almost every one, something I hadn't noticed before.
Downtown Los Gatos, very popular for dining/shopping/hair-styling, remains bustling by all appearances. However, there are warning signs... Two small shops are boarded up, another (Twigs) is going out of business, and one large outfit (Sharper Image) will vacate soon... The new Apple store in town looked pretty dead this weekend.
Tim, as is typical, there are a few companies tracking commercial vacancies and they tend to use different measures of "vacant". Some companies considered leased space occupied - even before the tenant moves in - and others count it as vacant. The best way to track this info is to use the same source and watch the trend! They are trending in the same direction now - higher vacancies.
lets see...cre follows re with a lag...and the worst of re isnt done
over at marketwatch
Sales of existing homes likely fell again in April, to a seasonally adjusted annual rate of 4.84 million from 4.93 million in March, according to a survey of economists conducted by MarketWatch. That would be another cyclical low.
snip... markets are persuaded that the FOMC won't cut rates again for fear that it could fuel higher prices
snip
Economists surveyed by MarketWatch expect that the PPI rose 0.5% in April, which would bring the inflation rate over the past year to nearly 7%. The core rate - which excludes food and energy prices - is expected to have risen 0.2%. Unlike in last week's seasonally adjusted consumer-price index, the impact of higher energy costs is expected to be seen in the PPI.
Yep, Williams Sonoma is still there. And in fact the last time I popped my head in, they had a line of folks waiting at the register to give away their money.
If CRE has entered such a serious slump, why does SRS trade near its 52 week low, 40% off the high of several weeks ago? This is not meant as a snarky remark but I'd really like to hear the explanation - anyone?
Amazing that these "experts" actually get any respect (let alone pay) for what they do, with statements like that "recession over by September" call. Really, I mean, where's the intellectual honesty when somebody makes a pronouncement like that, as if they could have any eff'in idea on timing, let alone the end result!?
I guess they gotta say something to justify their professional existence.
Well, it's full steam ahead for 42 acres at I75 Central Expressway and Walnut Hill in Dallas, TX costing some $300 million and bordering my neighborhood - The Meadows. "The Glen at Preston Hollow will transform a site formerly occupied by 1960s apartments into an in-town village." They are knocking down the aparments now and new building as not started. The adjoining neighborhoods banded together and we kept out all of the big box retailers. Provident Realty :: A Visionary Approach To Success
A Sorbeteria opened this week nearby. My lifestyle will never be the same now that I can order a 'Grumpy Larry's Lemon' daily! Out with the J&B in with healthy Peach Perfection and Orange Peel with Splenda. Sorbeteria serves silly named sorbets, smoothies, granitas and not much else. One scoop is three bucks. Silly! Motto: Forget everything you've ever known about sorbet... including reasonable prices.
"Downtown Los Gatos, very popular for dining/shopping/hair-styling, remains bustling by all appearances. However, there are warning signs... Two small shops are boarded up, another (Twigs) is going out of business, and one large outfit (Sharper Image) will vacate soon... The new Apple store in town looked pretty dead this weekend."
The wife and I drove through there a couple of Sundays ago, stopped at Los Osos for some coffee, and I know what you mean. A lot of people on the streets, but vacancies here and there, which is unusual.
The situation in downtown Santa Cruz -- Los Gatos' hippie twin -- is almost identical.
The other problem with CRE- the smaller banks are loaded to the gills with this stuff. From John Dugan back a couple of months ago:
Over a third of the nations community banks have commercial real estate concentrations exceeding 300 percent of their capital, and almost 30 percent have construction and development loans exceeding 100 percent of capital. Here in Florida, as in other states where housing is so important to local economic growth, the concentration levels are more pronounced. Over 60 percent of Florida banks have CRE loans exceeding 300 percent of capital, and more than half have C&D loans exceeding 100 percent of capital.
A Sorbeteria opened this week nearby. My lifestyle will never be the same now that I can order a 'Grumpy Larry's Lemon' daily!.... Well the traditional drink for RE bears is Jamba Juice, 'cause unlike Casey, we can still affore 'em. Of course drinking something made with wheat-grass sounds like a punishment to me.
Lowe's Cos. reported a 17.9 percent drop in first-quarter earnings on Monday as the slumping U.S. housing market and softer economy hurt sales. Its shares fell almost 3 percent in premarket trading.
And I wouldn't worry about commercial real estate. Yesterday I read a nice article at CNN Money that said REIT's were the new hot investment sector.
The housing market is still a mess but funds that invest in real estate stocks are on fire this year. Here's why the comeback may be for real.
PLEASE note that this Kermit Baker is the same one from Harvard's Joint Center for Housing Studies, which some commenters here claim is just a mouthpiece for the industry similar to NAR.
"Our smallish community has a 50,000 square-foot office building under construction without a single bit pre-leased."
It is always amazing to me how things like that get so far along. I don't think I've ever known a developer or a bank in my life that would get into or finance a project without pre-commitments from end tenants... yet there certainly seem to be enough of them out there who are willing to do so.
Same with housing. The nationals tend to do a lot more spec building than the local guys who used to make up the industry. The advantages of spec building are that it keeps the homeowner out of your hair and lets you build your own product on your own schedule.. the disadvantages, however, are now painfully obvious.
We still haven't seen major homebuilder BKs, but I'm convinced they are coming as soon as execs can strip everything out of the companies.
The May issue of the Moody's/REAL Commercial Property Price Index (CPPI), based on data through the end of March, experienced the largest one-month decline since the inception of the index. The aggregate index, now 2.6% off the peak of October 2007, is performing as befits a process of price discovery in a period of low liquidity some ups, more downs, with a downward net bias over time.
Monthly transaction volume in March was down from the monthly average of last year, measured either in number (by about one-third) or dollar value (by about one-half). Nonetheless, the number of repeat sales was still eleven times greater than that needed to achieve the requisite degree of statistical reliability.
In the aggregate, the distribution of transactions has drifted toward lower-priced assets over the last year.
The national property-type series are on a quarterly basis, and all four products are down from their peak prices of 2007 (with peaks in different quarters of last year for different property types).
The composition of the Top Ten cities has been revised in this report. In general, the last two years has seen more transactions in the Texas markets, so Dallas and Houston moved into the Top Ten in more property types. Conversely, several Sun Belt cities had fewer repeat sales in the 2006-2007 period than in the two years before that, including Orlando, Phoenix, Tampa, and South Florida.
Historically the Top Ten cities have comprised approximately 50%-75% of all repeat sales. That share has dropped to the lower end of that band for all property types.
Kevin P.-- You're being very unfair to Kermit Baker. I've known him for many years, and even though he's sometimes wrong and sometimes irritating, he always calls 'em as he sees 'em.
invisible hand - read my comment closely. I agree with you and was pointing out that the researchers at the Joint Center are not stooges of the industry.
Tom Lindmark writes:
Interesting article. Availability of financing particularly to refi maturing CMBS issues is going to be critical. Unless this market and other credit markets come back there is going to be a crunch in CRE. Here's what I wrote a couple of weeks ago-http://blog.metro-real-estate.com/?p=345
The big refi wave in CMBS doesn't begin to roll until 2011, and the fact that ~4% of the market (loans from the late 90's) are maturing in the next couple of years is not a problem. These loans were underwritten more cautiously, have 10 years of appreciation behind them, and plenty of avenues to get financing. This mini-refi wave is not a problem. I don't even think the slightly larger wave in 2011+ is a problem (10-years of appreciation from a starting point where CRE values were depressed). On the other hand, be deeply concerned about the 2 or 5-year fixed-rate universe (relatively small) coming due in CMBS, and obviously everyone is concerned about the floating-rate universe of transitional loans (although most are unlike Macklowe and have three 12-month extensions available essentially making them 6-year loans)
Insurance companies are having no problem stealing back market share from the CMBS market.
It's interesting to note how much this has affected regions that have little basis for continued development. I can only guess regional governments have played their part in attracting numerous retail projects that have little actual support by population. As one far-flung example, consider Vancouver Island in Canada. Despite two-thirds of the population (750,000) residing in Victoria, developers have constructed numerous shopping mall northward purely on the hype of the moment. The ensuing crunch is going to be felt everywhere I suspect.
BuilderBrokerNetwork.com is an inexpensive way of marketing your Commercial Real Estate. For only $59.99 a year you can post as many Listings and Wants/Needs as you want. There are also other benefits for paid members.
Right now, FREE MEMBERS can post as many Listings and Wants/Needs as they want but at any time this offer will end.
I really hope this helps because the alternative is paying $600-$800 a year for doing the same thing.
You have to read to page 3 of the linked article to understand the most important point:
"There's more lifestyle centers out there for sale than we've seen in the past," David Simon said. "I think the floodgates of that is just going to begin to open ... We're going to end up dealing with the construction lender."
David Simon is saying: "There's no point to building new traditional shopping malls. We'll just wait and let malls now in construction default and we'll vulture them."
Goodbye to new mall construction for awhile, like the next decade of so.
OFF TOPIC:
CR, you are like phantom of the opera.
WHO ARE YOU?
ARE YOU GOING TO INTRODUCE YOURSELF SOMETIME?
Gool Luck to all.
CR,
When are you going to make a Depression call?
Think of the fame, fortune, and fun when you turn out to be right.
If possible can someone please let me know of a website that provides free credit default swap spreads / quotes, because I am an individual investor who does not have access to a Bloomberg machine and does not know how else to access this information. Thanks in advance.
Also, to Calculated Risk, can you please show an updated abx and/or cmbx chart and give your insights on it when you have a chance? It would be much appreciated.
what the hell is a "lifestyle center". Does it have personal shoppers, massage therapists and valet parking to go to Starbucks and visit the baristas???
golden times - you can find the charts - COB, on markit.
lifestyle center
Turnberry Associates
When we were kids, our lifestyle centers were our "towns". Every Class A developer and REIT backing it should be...punched in the gut and pissed on.
golden times | 05.18.08 - 11:31 pm | # >an updated abx and/or cmbx chart
Thats easy
abx and/or cmbx chart
Thanks
sbarrkum
Please let us know how you fare on your trades !!.
CR
How long must a unit be empty for it to be categorized as "vacant"? Thanks for the thorough analysis.
Real Estate Bust -- The Sequel!
Better, bigger, badder than the first!!!
Retail on the slide? You would not know it in Sarasota FL they are buidling a HUGE luxury mall at University Parkway and Highway 75
Interesting article. Availability of financing particularly to refi maturing CMBS issues is going to be critical. Unless this market and other credit markets come back there is going to be a crunch in CRE. Here's what I wrote a couple of weeks ago-http://blog.metro-real-estate.com/?p=345
Re: "Commercial Real Estate: "The problems are in all of it"'
I hope the following chart link works, as sometimes they don't, but should it appear on your screen, it represents a fine example of two things: First, bubbles come and go and second, once a bubble does pop, the balloon remains busted. Thus, as in previous bubbles, the current housing bubble is not likely to be fixed any time soon! The only people that made money, are long gone and the only thing to be done now is sift through the ashes and accept reality and move on to another game.
M B I A INC Share Price Chart | MBI - Yahoo! Finance
Sbarrkum, thanks for the links. I'm not a trader, I just wanted some basic info on cds. But I did not see how to get spreads for specific companies, so if possible can you let me know how to get those?
Here in Los Gatos (Silicon Valley), a stretch of University Avenue 1/2 mile from downtown sprouted half a dozen brand new office buildings around the time of the Tech Bubble. Recently I have noticed "Space Available" signs in front of almost every one, something I hadn't noticed before.
Downtown Los Gatos, very popular for dining/shopping/hair-styling, remains bustling by all appearances. However, there are warning signs... Two small shops are boarded up, another (Twigs) is going out of business, and one large outfit (Sharper Image) will vacate soon... The new Apple store in town looked pretty dead this weekend.
Tim, as is typical, there are a few companies tracking commercial vacancies and they tend to use different measures of "vacant". Some companies considered leased space occupied - even before the tenant moves in - and others count it as vacant. The best way to track this info is to use the same source and watch the trend! They are trending in the same direction now - higher vacancies.
Best to all.
This is my lifestyle spot: Northstar at Tahoe - Photo Gallery
lets see...cre follows re with a lag...and the worst of re isnt done
over at marketwatch
Sales of existing homes likely fell again in April, to a seasonally adjusted annual rate of 4.84 million from 4.93 million in March, according to a survey of economists conducted by MarketWatch. That would be another cyclical low.
snip... markets are persuaded that the FOMC won't cut rates again for fear that it could fuel higher prices
snip
Economists surveyed by MarketWatch expect that the PPI rose 0.5% in April, which would bring the inflation rate over the past year to nearly 7%. The core rate - which excludes food and energy prices - is expected to have risen 0.2%. Unlike in last week's seasonally adjusted consumer-price index, the impact of higher energy costs is expected to be seen in the PPI.
More awful housing and inflation data expected this week - MarketWatch
Hey, ShortCourage!
Is that Williams Sonoma store on Santa Cruz Ave. still open?
mp,
Yep, Williams Sonoma is still there. And in fact the last time I popped my head in, they had a line of folks waiting at the register to give away their money.
That'll change, I predict.
If CRE has entered such a serious slump, why does SRS trade near its 52 week low, 40% off the high of several weeks ago? This is not meant as a snarky remark but I'd really like to hear the explanation - anyone?
Well, it's official. All of the experts agree. The recession will be over by September.
BWAHAHAHA!
U.S. Recession to End by September, Business Economists Say - Bloomberg.com
Amazing that these "experts" actually get any respect (let alone pay) for what they do, with statements like that "recession over by September" call. Really, I mean, where's the intellectual honesty when somebody makes a pronouncement like that, as if they could have any eff'in idea on timing, let alone the end result!?
I guess they gotta say something to justify their professional existence.
G'night all.
"CR,
When are you going to make a Depression call?"
I would not do that, at least for while.
EWZ
tj & the bear: Real Estate Bust -- The Sequel!
Better, bigger, badder than the first!!!
Credit Crunch 2:
This Time It's Commercial!
via mp:
``Recovery forces are in place and conditions should improve over the next year and a half.''
The palace in Baghdad is secure. Mission Accomplished!
Well, it's full steam ahead for 42 acres at I75 Central Expressway and Walnut Hill in Dallas, TX costing some $300 million and bordering my neighborhood - The Meadows. "The Glen at Preston Hollow will transform a site formerly occupied by 1960s apartments into an in-town village." They are knocking down the aparments now and new building as not started. The adjoining neighborhoods banded together and we kept out all of the big box retailers.
Provident Realty :: A Visionary Approach To Success
2007 Security Capital Assurance
Layers of securities within an ABS CDO
The "Outer CDO": The CDO that we have insured
We analyzed each 1st layer security and, within each "inner" CDO, each 2nd layer security
We took into account the significant differences between individual RMBS pools
We used conservative assumptions in modeling the cash flow from inner CDOs
The case loss provisions we have reflect the best information available to us.
A Sorbeteria opened this week nearby. My lifestyle will never be the same now that I can order a 'Grumpy Larry's Lemon' daily! Out with the J&B in with healthy Peach Perfection and Orange Peel with Splenda. Sorbeteria serves silly named sorbets, smoothies, granitas and not much else. One scoop is three bucks. Silly! Motto: Forget everything you've ever known about sorbet... including reasonable prices.
"Downtown Los Gatos, very popular for dining/shopping/hair-styling, remains bustling by all appearances. However, there are warning signs... Two small shops are boarded up, another (Twigs) is going out of business, and one large outfit (Sharper Image) will vacate soon... The new Apple store in town looked pretty dead this weekend."
The wife and I drove through there a couple of Sundays ago, stopped at Los Osos for some coffee, and I know what you mean. A lot of people on the streets, but vacancies here and there, which is unusual.
The situation in downtown Santa Cruz -- Los Gatos' hippie twin -- is almost identical.
The other problem with CRE- the smaller banks are loaded to the gills with this stuff. From John Dugan back a couple of months ago:
Over a third of the nations community banks have commercial real estate concentrations exceeding 300 percent of their capital, and almost 30 percent have construction and development loans exceeding 100 percent of capital. Here in Florida, as in other states where housing is so important to local economic growth, the concentration levels are more pronounced. Over 60 percent of Florida banks have CRE loans exceeding 300 percent of capital, and more than half have C&D loans exceeding 100 percent of capital.
Why would The Fed give a public statement that banks should increase their capital when all they have to do is the:
"28 day" Balance Sheet Houdini Fiat Manoeuver?
My all time favorite is the 28 day loan.
To fool the masses make it appear complicated....love the 28 day printing press
A Sorbeteria opened this week nearby. My lifestyle will never be the same now that I can order a 'Grumpy Larry's Lemon' daily!.... Well the traditional drink for RE bears is Jamba Juice, 'cause unlike Casey, we can still affore 'em. Of course drinking something made with wheat-grass sounds like a punishment to me.
The silencing of MEW?
Lowe's Cos. reported a 17.9 percent drop in first-quarter earnings on Monday as the slumping U.S. housing market and softer economy hurt sales. Its shares fell almost 3 percent in premarket trading.
And I wouldn't worry about commercial real estate. Yesterday I read a nice article at CNN Money that said REIT's were the new hot investment sector.
The housing market is still a mess but funds that invest in real estate stocks are on fire this year. Here's why the comeback may be for real.
Get in while you still can.
PLEASE note that this Kermit Baker is the same one from Harvard's Joint Center for Housing Studies, which some commenters here claim is just a mouthpiece for the industry similar to NAR.
There is a strangely designed building off a major interchange near Coral Gables with a big sign that sez: Entire Building For Rent!
Don't banks always require some pre signed tenants before they go ahead?
Maybe the prospective client went bankrupt?
"Don't banks always require some pre signed tenants before they go ahead?
Maybe the prospective client went bankrupt?"
Our smallish community has a 50,000 square-foot office building under construction without a single bit pre-leased.
It's about 3/4 finished -- but no work has been done for the past two months. Looks like the money ran out.
"The new Apple store in town looked pretty dead this weekend."
Uh oh. They've pretty pretty bullet proof up until now. Hopefully them furriners buy the new iPhones. Or my stock might party like its 1999 again.
"Our smallish community has a 50,000 square-foot office building under construction without a single bit pre-leased."
It is always amazing to me how things like that get so far along. I don't think I've ever known a developer or a bank in my life that would get into or finance a project without pre-commitments from end tenants... yet there certainly seem to be enough of them out there who are willing to do so.
Same with housing. The nationals tend to do a lot more spec building than the local guys who used to make up the industry. The advantages of spec building are that it keeps the homeowner out of your hair and lets you build your own product on your own schedule.. the disadvantages, however, are now painfully obvious.
We still haven't seen major homebuilder BKs, but I'm convinced they are coming as soon as execs can strip everything out of the companies.
The May issue of the Moody's/REAL Commercial Property Price Index (CPPI), based on data through the end of March, experienced the largest one-month decline since the inception of the index. The aggregate index, now 2.6% off the peak of October 2007, is performing as befits a process of price discovery in a period of low liquidity some ups, more downs, with a downward net bias over time.
Monthly transaction volume in March was down from the monthly average of last year, measured either in number (by about one-third) or dollar value (by about one-half). Nonetheless, the number of repeat sales was still eleven times greater than that needed to achieve the requisite degree of statistical reliability.
In the aggregate, the distribution of transactions has drifted toward lower-priced assets over the last year.
The national property-type series are on a quarterly basis, and all four products are down from their peak prices of 2007 (with peaks in different quarters of last year for different property types).
The composition of the Top Ten cities has been revised in this report. In general, the last two years has seen more transactions in the Texas markets, so Dallas and Houston moved into the Top Ten in more property types. Conversely, several Sun Belt cities had fewer repeat sales in the 2006-2007 period than in the two years before that, including Orlando, Phoenix, Tampa, and South Florida.
Historically the Top Ten cities have comprised approximately 50%-75% of all repeat sales. That share has dropped to the lower end of that band for all property types.
--
"Another great quote: "a consumer base that never materialized"."
But, CR, don't forget that CRE was not as overbuilt as RRE. Let us see which rents fall more.
Jas
Kevin P.-- You're being very unfair to Kermit Baker. I've known him for many years, and even though he's sometimes wrong and sometimes irritating, he always calls 'em as he sees 'em.
invisible hand - read my comment closely. I agree with you and was pointing out that the researchers at the Joint Center are not stooges of the industry.
mp,
this is so funny they did not see it coming but now they when it will up end up
*(they know when it will end up)
I emailed the bloomberg guy, mp, which I never do and he responded,
well, he didn't agree, but was quoting the experts.
He also wanted to know about hard equity lenders, which I mentioned. Shouldn't a reporter know about those, or am I being too hard on him?
Drey, fundamentals only go so far in investing. Markets go up, SRS goes down.
Tom Lindmark writes:
Interesting article. Availability of financing particularly to refi maturing CMBS issues is going to be critical. Unless this market and other credit markets come back there is going to be a crunch in CRE. Here's what I wrote a couple of weeks ago-http://blog.metro-real-estate.com/?p=345
The big refi wave in CMBS doesn't begin to roll until 2011, and the fact that ~4% of the market (loans from the late 90's) are maturing in the next couple of years is not a problem. These loans were underwritten more cautiously, have 10 years of appreciation behind them, and plenty of avenues to get financing. This mini-refi wave is not a problem. I don't even think the slightly larger wave in 2011+ is a problem (10-years of appreciation from a starting point where CRE values were depressed). On the other hand, be deeply concerned about the 2 or 5-year fixed-rate universe (relatively small) coming due in CMBS, and obviously everyone is concerned about the floating-rate universe of transitional loans (although most are unlike Macklowe and have three 12-month extensions available essentially making them 6-year loans)
Insurance companies are having no problem stealing back market share from the CMBS market.
"...a consumer base that never materialized
It's interesting to note how much this has affected regions that have little basis for continued development. I can only guess regional governments have played their part in attracting numerous retail projects that have little actual support by population. As one far-flung example, consider Vancouver Island in Canada. Despite two-thirds of the population (750,000) residing in Victoria, developers have constructed numerous shopping mall northward purely on the hype of the moment. The ensuing crunch is going to be felt everywhere I suspect.
Kevin P. -- I re-read your post and I now see that I was 180 degrees off. You're right, we agree on Kermit Baker.
Nice Blog.
Here's another tip about marketing Commercial Real Estate.
BuilderBrokerNetwork.com is an inexpensive way of marketing your Commercial Real Estate. For only $59.99 a year you can post as many Listings and Wants/Needs as you want. There are also other benefits for paid members.
Right now, FREE MEMBERS can post as many Listings and Wants/Needs as they want but at any time this offer will end.
I really hope this helps because the alternative is paying $600-$800 a year for doing the same thing.
Thanks.