Macroeconomia Immobiliare USA (residenziale e commerciale) e finanza strutturata (1 Viewer)

Imark

Forumer storico
Registrato
6 Ottobre 2006
Messaggi
16.988
Vado parzialmente OT per chiedervi se state pensando di alleggerire certe posizioni (penso in particolare a quelle sulle banche americane) in previsione dell'impatto di un Ch11 di GM.
Ho l'impressione che molti titoli potrebbero riprendersi ben più bassi di quanto siano ora... che ne dite?
Eh, lo pensiamo in tanti, anche perché non sono solo lì i problemi: le stime sul comparto (una volta definito "difensivo") dell'immobiliare commerciale, con relative previsioni di perdite sulla finanza strutturata, ossia i bond delle cartolarizzazioni dei relativi crediti sono da bollettino di guerra ... :cool: e già l'andamento del Q4/2008 è stato disastroso (nei giorni scorsi un report di Moody's segnalava una situazione ai minimi da oltre 30 anni), con il bottom che si dovrà ancora fare ed arriverà, ad essere ottimisti, enl penultimo o nell'ultimo trimestre dell'anno.

E va bene che le banche hanno diritto al tarocco in bilancio, però prima o poi gli scheletri li dovrai pure tirare fuori dagli armadi (fine OT).
 
Ultima modifica:

ale123

Nuovo forumer
Registrato
15 Gennaio 2009
Messaggi
63
Località
RM
Eh, lo pensiamo in tanti, anche perché non sono solo lì i problemi: le stime sul comparto (una volta definito "difensivo") dell'immobiliare commerciale, con relative previsioni di perdite sulla finanza strutturata, ossia i bond delle cartolarizzazioni dei relativi crediti sono da bollettino di guerra ... :cool: e già l'andamento del Q4/2008 è stato disastroso (nei giorni scorsi un report di Moody's segnalava una situazione ai minimi da oltre 30 anni), con il bottom che si dovrà ancora fare ed arriverà, ad essere ottimisti, enl penultimo o nell'ultimo trimestre dell'anno.

E va bene che le banche hanno diritto al tarocco in bilancio, però prima o poi gli scheletri li dovrai pure tirare fuori dagli armadi (fine OT).
Mi sembra un argomento di grande interesse.
Pensate sia il caso di aprire una discussione specifica in tal senso?
 

paologorgo

Chapter 11
Registrato
2 Maggio 2004
Messaggi
4.129
Località
Carpi - MO -
Mi sembra un argomento di grande interesse.
Pensate sia il caso di aprire una discussione specifica in tal senso?
volentieri, io ho seguito il fallimento (fino ad oggi... :D) più annunciato della storia, GGP, ora GGWPQ.PK GEN GROWTH PROP INC, il secondo REIT di spazi commerciali (oltre 200 mall, alcuni dei più esclusivi degli USA).

http://www.ggp.com/Default.aspx

Early Thursday morning, the managers of General Growth Properties (GGP) opted to file for Chapter 11 Bankruptcy protection. General Growth has been the poster child of extreme overleveraging in the real estate industry. The filing totals approximately $24 billion in debt and is the largest real estate bankruptcy in U.S. history. General Growth had been working for months to try and settle its debt obligations outside of bankruptcy court. It had been working with creditors to try and relax the terms of the agreements, through not paying interest and extending the time period it would have to repay the debt. However, no across-the-board resolution was reached. It was only on March 31st that the front page of the Marketplace section of The Wall Street Journal had a large article on how General Growth had avoided Chapter 11. So what should you look at going forward and how will this impact the commercial real estate market in general?
Remember Simon?
In my recent article on Simon Property Group (SPG) I stated that if GGP were to file for Chapter 11 or simply continue to struggle that SPG would be positioned to snatch up great pieces of real estate at liquidation prices. Though I don’t think that a fire sale of all the properties is in the mix, it is hard to imagine how they are going to be able to satisfy debt holder demands without raising capital.
Since they are unable to get financing, selling some properties is the next option. I have gotten a lot of criticism regarding SPG because of its recent debt offering and equity raise. What is so essential to note in economic times like these is that even though its debt has a rate of just over 10% they were still able to issue debt! In normal markets a rate that high would be of concern, but I hardly doubt anyone will argue that these aren’t normal markets. I would not be writing this article right now if General Growth were able to obtain financing for more than a couple weeks. They would have loved 10% on its debt, and the ability to issue 17.5 million new shares at around $31.
The point here is that there is financing available to those companies who qualify, such as SPG, and Taubman Centers Inc. (TCO). What is very important to note is that the cause of General Growth’s problems did not come from failing properties that the company held in its portfolios, but from the extreme overleveraging that has been the theme song of the economic crisis. Its malls had an average occupancy rate of 92.5% in Q42008 and are rated as above-average. CEO Adam Metz said that the “core business remains sound and is performing with stable cash flows.”
The mountain of debt that GGP must overcome is just daunting. When CEOs such as David Simon of SPG are quoted as saying “you’re the strong and you want to get stronger,” that is a clear signal that SPG is looking at acquisitions. I wouldn’t doubt that an underlying reason for its two most recent capital raises was a speculative bet on General Growth having serious trouble in the near future.
Going Forward
Two things will be interesting to watch going forward. One is whether or not General Growth will survive the process (I think it will, they just need the proper environment to restructure). Second is which competitor will take advantage of the property sales the most and position themselves for long term growth. As I have stated before, it seems like some property sales are necessary in raising capital to pay down debt. It is no mistake that Simon is the cream of the crop and that management is focused on growth. What we are seeing are the markets at work. General Growth made a mistake that cost them and now they are paying for it. There is no government bailout or lobbyists trying to tell politicians how unfortunate GGP’s situation is, just pure market forces. One man’s blunder is another man’s success. Therefore, there will be a shakeup and those that were once positioned behind GGP may be able to make moves upward.
Commercial Real Estate Effect
There is a concensus that commercial real estate still has some bad times ahead of it. The difference of opinions lies in the severity of the bad times. The Fed is contemplating issuing 5 year loans to investors to buy commercial mortgage backed securities through its TALF facility. This is still in the works. This will effect GGP’s bankruptcy filing and will have a substantial impact on the amount of properties that they end up selling.
As I stated before, liquidation does not seem probable. Oversaturating the market with properties will simply depress prices further due to an oversupply. If the demand is only for a handful of properties, then that's all they should sell. It would also be irresponsible of all parties involved to allow a total liquidation where properties flood the market and cause the problem to get worse rather than help to solve it. The one glimmer of hope is that the government doesn’t have its hands in this so the end result has more promise of being successful.
Check back for ongoing analysis of GGP’s filing and the residual effects on the market.

http://seekingalpha.com/article/131...growth-s-bankruptcy-on-commercial-real-estate

 

paologorgo

Chapter 11
Registrato
2 Maggio 2004
Messaggi
4.129
Località
Carpi - MO -
Eh, lo pensiamo in tanti, anche perché non sono solo lì i problemi: le stime sul comparto (una volta definito "difensivo") dell'immobiliare commerciale, con relative previsioni di perdite sulla finanza strutturata, ossia i bond delle cartolarizzazioni dei relativi crediti sono da bollettino di guerra ... :cool: e già l'andamento del Q4/2008 è stato disastroso (nei giorni scorsi un report di Moody's segnalava una situazione ai minimi da oltre 30 anni), con il bottom che si dovrà ancora fare ed arriverà, ad essere ottimisti, enl penultimo o nell'ultimo trimestre dell'anno.

E va bene che le banche hanno diritto al tarocco in bilancio, però prima o poi gli scheletri li dovrai pure tirare fuori dagli armadi (fine OT).
A SINGLE WORD COMES TO MIND TO DESCRIBE global activity in commercial real estate in the first quarter: dreadful.



Willliam Waitzman Worldwide sales volume simply fell off a cliff in the first three months, plunging to one-sixth its level of two years ago -- and down 73% from 2008's first quarter -- to a paltry $47 billion, according to Real Capital Analytics' quarterly Global Capital Trends report. In the U.S., there was barely $9 billion in commercial-property transactions, a sum that might have represented a single building a few short years ago.
"The commercial-sales market as we once knew it is basically nonexistent," says Dan Fasulo, a managing director at Real Capital and one of the authors of the report. The bid-ask spread is "as wide as it has been since the early '90s," he adds.
In the first quarter, new reports of defaulted mortgages and failed commercial-property companies exceeded $55 billion, bringing the total of distressed assets to $153 billion.
The misery was widely distributed: Ireland saw a complete absence of sales, while 17 nations saw sales fall by 80% or more in the quarter versus 2008's first quarter. Price changes, meanwhile, varied from small gains to declines of 40% to 50% below those of a few years ago.
Fasulo isn't too sanguine about prospects for improvement in the current quarter, although he notes that "we've seen a trickle of things picking up just over the past few weeks." He points to places like London and Paris, where markets have seen pricing beginning to correct.
To get the market back on track, says Fasulo, the distressed properties need to be cleared out, and the banks, some of which are lending, need to be more generous with their terms.

http://online.barrons.com/article/SB124061345552854615.html?ru=yahoo&mod=yahoobarrons
 

Imark

Forumer storico
Registrato
6 Ottobre 2006
Messaggi
16.988
Mi sembra un argomento di grande interesse.
Pensate sia il caso di aprire una discussione specifica in tal senso?
Sull'Immobiliare USA ? (residenziale e/o commerciale) o sulla finanza strutturata della cartolarizzazioni (c'è dentro di tutto quale asset collaterale: dai mutui immobiliari ai crediti generati dall'utilizzo delle carte di credito fino a quelli occasionati dai leveraged loans in occasione dei LBO) ?

Se lo apri, ben volentieri concorrerò postandoci qualcosa... :up:

PS: vedo che Paolo ha già postato dell'interessante materiale, e procedo ad uno spin off dal 3D... ;)
 

paologorgo

Chapter 11
Registrato
2 Maggio 2004
Messaggi
4.129
Località
Carpi - MO -
questo articolo è molto lungo, ma ci sono alcuni spunti interessanti:

Mall Titan Enters Chapter 11


Mall owner General Growth Properties Inc. sought bankruptcy protection early Thursday in one of the largest real-estate failures in U.S. history, capping a precarious, months-long effort to juggle the crushing $27 billion debt load it shouldered in past acquisition sprees.

The bankruptcy will have far-reaching implications for the mall industry, including putting pressure on already declining property values of U.S. malls, and subsequently mall mortgages, if General Growth dumps property to pay creditors. It also could consolidate power in the oligarchic mall industry if major players like Simon Property Group Inc., Westfield Group and Taubman Centers Inc. can come up with the capital to pick up choice pieces.
The collapse points to an underlying concern for the commercial real estate industry, too. Developers and property owners that loaded up on debt during the past real-estate boom now face mountains of that debt coming due. But some of those borrowers, like General Growth, lack the cash or the borrowing capacity to refinance or pay those debts. Many lenders are granting cash-strapped borrowers extensions of their payment deadlines, but that only postpones rather than resolves the issue. This year alone, an estimated $248 billion of commercial mortgages will come due, up from $230 billion in 2008, according to real-estate research company Foresight Analytics LLC.
Meanwhile, commercial-property values have sunk, hampering the ability of owners to refinance or sell their properties. Real estate research company Green Street Advisors predicts a 40% overall decline in U.S. commercial property values in this recession.
Furthermore, General Growth's bankruptcy comes with the U.S. retail market under severe duress. Shoppers have cut their spending as they contend with mounting job losses, home foreclosures and depleted retirement savings. Additionally, a 1.1% decline in retail sales in March from the previous month, following recent gains, signaled that consumer spending probably won't bounce back quickly from the depths of the recession. Retailers, in turn, have slashed their expansion plans and closed stores a pace matched only in the recessions of 2001 and the early 1990s. By extension, mall owners have suffered rising vacancy rates and weakening rent growth at their properties.
Among real-estate failures, General Growth's bankruptcy has few peers. In 1992, Canadian developer Olympia & York Developments Ltd., developer of London's Canary Wharf complex, sought bankruptcy protection with $18.6 billion in debt. Last year, investment bank Lehman Brothers Holdings Inc.'s real-estate assets were valued at $43 billion when it filed for bankruptcy protection, but that figure is mostly made up of loans on real estate.

Selling any malls in this recession will be challenging, given that capital is scarce for would-be buyers. Last year, only eight regional malls traded hands in the largest 76 U.S. markets, down from 19 in 2007, according to real-estate research firm Reis Inc. In that span, U.S. mall values declined by roughly 30%, according to Green Street Advisors Inc. A liquidation of General Growth malls would deepen that decline, perhaps pushing the value of other malls below that of the debt they carry, which would make it tougher to sell or refinance those malls until their values recover.
"If even 10% of those 200 [General Growth] malls are sold, it will represent a deluge of regional malls on the market," says Victor Calanog, Reis' director of research. "Any increase in supply without a pickup in demand will depress prices."
Others are less pessimistic. William Taubman, chief operating officer of luxury mall owner Taubman Centers Inc., foresees the bankruptcy resulting in only a few General Growth malls trading hands. "I think there are plenty of financial players who are interested in buying well located, well-leased, high-quality property at decent pricing," he said. "It will take time, but I think this will resolve itself in a smoother manner than most would think."
Some complications will prove to be unavoidable, though. Several of General Growth's malls likely can't be sold because they're "under water," meaning their value has declined below what is owed on their mortgages. If so, lenders who provided those mortgages can ask the bankruptcy judge for permission to foreclose on the properties. However, they'll first have to convince the judge that those malls aren't critical to General Growth's restructuring or liquidation plan. Green Street Advisors estimates that roughly 60 of General Growth's malls – mostly those of average or below-average quality – are now valued at less than their mortgage amounts.
Other mall owners are acutely aware of the damage that a General Growth liquidation could do to the value of their own malls and to lenders' willingness to lend to the industry. Thus, many prefer that General Growth survive as a standalone company. "I believe that the most value will be preserved for all parties by a negotiated solution that keeps the company intact," said Edward Glickman, president and chief operating officer of Pennsylvania Real Estate Investment Trust, which owns 38 malls.

http://online.wsj.com/article/SB123985534483724219.html
 

Imark

Forumer storico
Registrato
6 Ottobre 2006
Messaggi
16.988
questo articolo è molto lungo, ma ci sono alcuni spunti interessanti:

Mall Titan Enters Chapter 11


Mall owner General Growth Properties Inc. sought bankruptcy protection early Thursday in one of the largest real-estate failures in U.S. history, capping a precarious, months-long effort to juggle the crushing $27 billion debt load it shouldered in past acquisition sprees.

The bankruptcy will have far-reaching implications for the mall industry, including putting pressure on already declining property values of U.S. malls, and subsequently mall mortgages, if General Growth dumps property to pay creditors. It also could consolidate power in the oligarchic mall industry if major players like Simon Property Group Inc., Westfield Group and Taubman Centers Inc. can come up with the capital to pick up choice pieces.
The collapse points to an underlying concern for the commercial real estate industry, too. Developers and property owners that loaded up on debt during the past real-estate boom now face mountains of that debt coming due. But some of those borrowers, like General Growth, lack the cash or the borrowing capacity to refinance or pay those debts. Many lenders are granting cash-strapped borrowers extensions of their payment deadlines, but that only postpones rather than resolves the issue. This year alone, an estimated $248 billion of commercial mortgages will come due, up from $230 billion in 2008, according to real-estate research company Foresight Analytics LLC.
Meanwhile, commercial-property values have sunk, hampering the ability of owners to refinance or sell their properties. Real estate research company Green Street Advisors predicts a 40% overall decline in U.S. commercial property values in this recession.
Furthermore, General Growth's bankruptcy comes with the U.S. retail market under severe duress. Shoppers have cut their spending as they contend with mounting job losses, home foreclosures and depleted retirement savings. Additionally, a 1.1% decline in retail sales in March from the previous month, following recent gains, signaled that consumer spending probably won't bounce back quickly from the depths of the recession. Retailers, in turn, have slashed their expansion plans and closed stores a pace matched only in the recessions of 2001 and the early 1990s. By extension, mall owners have suffered rising vacancy rates and weakening rent growth at their properties.
Among real-estate failures, General Growth's bankruptcy has few peers. In 1992, Canadian developer Olympia & York Developments Ltd., developer of London's Canary Wharf complex, sought bankruptcy protection with $18.6 billion in debt. Last year, investment bank Lehman Brothers Holdings Inc.'s real-estate assets were valued at $43 billion when it filed for bankruptcy protection, but that figure is mostly made up of loans on real estate.

Selling any malls in this recession will be challenging, given that capital is scarce for would-be buyers. Last year, only eight regional malls traded hands in the largest 76 U.S. markets, down from 19 in 2007, according to real-estate research firm Reis Inc. In that span, U.S. mall values declined by roughly 30%, according to Green Street Advisors Inc. A liquidation of General Growth malls would deepen that decline, perhaps pushing the value of other malls below that of the debt they carry, which would make it tougher to sell or refinance those malls until their values recover.
"If even 10% of those 200 [General Growth] malls are sold, it will represent a deluge of regional malls on the market," says Victor Calanog, Reis' director of research. "Any increase in supply without a pickup in demand will depress prices."
Others are less pessimistic. William Taubman, chief operating officer of luxury mall owner Taubman Centers Inc., foresees the bankruptcy resulting in only a few General Growth malls trading hands. "I think there are plenty of financial players who are interested in buying well located, well-leased, high-quality property at decent pricing," he said. "It will take time, but I think this will resolve itself in a smoother manner than most would think."
Some complications will prove to be unavoidable, though. Several of General Growth's malls likely can't be sold because they're "under water," meaning their value has declined below what is owed on their mortgages. If so, lenders who provided those mortgages can ask the bankruptcy judge for permission to foreclose on the properties. However, they'll first have to convince the judge that those malls aren't critical to General Growth's restructuring or liquidation plan. Green Street Advisors estimates that roughly 60 of General Growth's malls – mostly those of average or below-average quality – are now valued at less than their mortgage amounts.
Other mall owners are acutely aware of the damage that a General Growth liquidation could do to the value of their own malls and to lenders' willingness to lend to the industry. Thus, many prefer that General Growth survive as a standalone company. "I believe that the most value will be preserved for all parties by a negotiated solution that keeps the company intact," said Edward Glickman, president and chief operating officer of Pennsylvania Real Estate Investment Trust, which owns 38 malls.

http://online.wsj.com/article/SB123985534483724219.html
Davvero: estremamente interessante, sia per l'inquadramento di questo segmento dell'immobiliare commerciale in USA, sia (anzi, ancor di più) per la vicenda della REIT defaultata...
 

paologorgo

Chapter 11
Registrato
2 Maggio 2004
Messaggi
4.129
Località
Carpi - MO -
Davvero: estremamente interessante, sia per l'inquadramento di questo segmento dell'immobiliare commerciale in USA, sia (anzi, ancor di più) per la vicenda della REIT defaultata...
Poi ci sono diverse "complicazioni" (questo è solo uno dei commenti che ho letto...), sulle quali mi piacerebbe un tuo parere...

The shoes are starting to drop in the aftermath of the bankruptcy filing of retail shopping mall REIT General Growth Properties (GGP). Fitch Ratings has revised its Rating Outlook to Negative from Stable on 96 U.S. commercial mortgage-backed securities (CMBS) classes across 20 transactions. Fitch said the revised Rating Outlooks are in large part due to the Chapter 11 bankruptcy filing of GGP and certain affiliates which are borrowers in CMBS transactions. The filing includes the special purpose entity (SPE) borrowers for 158 retail properties. Of these, 63 properties secure 58 loans in Fitch rated U.S. CMBS transactions. “The inclusion of the SPE borrowers within GGP’s bankruptcy filing creates a level of uncertainty for CMBS investors. For example, while the voluntary filing of the SPE borrowers is an event of default on the CMBS loans, a bankruptcy court judge may prevent special servicers from foreclosing on the properties. If the properties remain within the bankruptcy proceedings, based on the material equity in many of these high performing assets, GGP could seek additional leverage secured by the mortgaged properties to help repay their corporate unsecured debt. The presence of additional debt would put substantial additional stress on the properties and impair the performance of the CMBS transactions. GGP has already requested $375 million of Debtor-in-Possession (DIP) financing. At a minimum, CMBS trusts which include GGP loans will incur additional servicing fees.”
Fitch said the 58 GGP loans included in Fitch rated transactions generally continue to maintain positive performance. The properties have a current average debt service coverage ratio (DSCR) of 1.78 times (x) based on the most recent financials provided.
However, given the uncertainty associated with the corporate bankruptcy filing and the potential additional loss severity for the CMBS loans, Fitch considers each of these assets a Loan of Concern. In addition, those loans with investment grade shadow ratings are no longer considered investment grade.
Full details are available here.


http://seekingalpha.com/article/132382-fitch-cuts-cmbs-ratings-in-wake-of-general-growth-filing

per disclosure, non posseggo nessun REIT, al momento, ma ho avuto (e probabilmente avrò in futuro...) azioni di quelli legati al settore della colocation, ovvero DLR (sicuramente) e DFT (forse).
 

ale123

Nuovo forumer
Registrato
15 Gennaio 2009
Messaggi
63
Località
RM
Sull'Immobiliare USA ? (residenziale e/o commerciale) o sulla finanza strutturata della cartolarizzazioni (c'è dentro di tutto quale asset collaterale: dai mutui immobiliari ai crediti generati dall'utilizzo delle carte di credito fino a quelli occasionati dai leveraged loans in occasione dei LBO) ?

Se lo apri, ben volentieri concorrerò postandoci qualcosa... :up:

PS: vedo che Paolo ha già postato dell'interessante materiale, e procedo ad uno spin off dal 3D... ;)
In effetti vedo che Paolo mi ha "sollevato" dall' ardua scelta :)
Nel senso che non ho certo le vostre conoscenze e competenze, e quindi il fatto che mi abbiate ascoltato vuol dire che almeno la proposta da me lanciata non era del tutto infondata.
Solo che non sapevo davvero come argomentare correttamente la cosa.
Ora seguiro con grande interesse tutti gli interventi, per capire ( grazie anche alla sfera di cristallo... :D ) cosa potrebbe accadere.
 

paologorgo

Chapter 11
Registrato
2 Maggio 2004
Messaggi
4.129
Località
Carpi - MO -
In effetti vedo che Paolo mi ha "sollevato" dall' ardua scelta :)
Nel senso che non ho certo le vostre conoscenze e competenze, e quindi il fatto che mi abbiate ascoltato vuol dire che almeno la proposta da me lanciata non era del tutto infondata.
Solo che non sapevo davvero come argomentare correttamente la cosa.
Ora seguiro con grande interesse tutti gli interventi, per capire ( grazie anche alla sfera di cristallo... :D ) cosa potrebbe accadere.
non ti fare distrarre dalla sfera di cristallo, mi riferivo a GM, ed anche Mark non mi capisce quando parlo per "metafore"... :D

un ultimo articolo (purtroppo la mia diligence è pressochè tutta in inglese, e quindi ci vuole pazienza se posto solo nella lingua di Albione...) - sempre riferito ai REITS commerciali, che però non vorrei monopolizzassero la conversazione... la mia posizione, in parole semplicissime, è che è meglio starci lontani, adesso. Come sempre succede, però, saranno penalizzati anche quelli (penso a chi è specializzato in colo o magari healthcare, etc.) che appartengono genericamente alla categoria, anche se il loro business non è in crisi. E poi, come sempre, emergeranno dei vincitori che si rafforzeranno dalla crisi... e i grafici si invertiranno...

Real Estate Investment Trusts (REITS) have long been a favorite holding for high-dividend investors. The recent bankruptcy filing of General Growth Properties (GGP) puts the spotlight on this group, particularly the Commercial REITS.
Those following my series, The High Dividend Investor’s Collapsing Dollar Survival Guide, or my newsletter, will note I’ve NO U.S. commercial REITS on my list of recommendations. In the past, their holding of hard assets and often generous and stable dividends would have made them legitimate candidates. No longer.
My readers may note that I do have a few Canadian REITS in the portfolio. These include commercial REIT RIOCAN, as well as

  • Canadian Apartment REIT
  • CML Healthcare Inc. Fund
  • Northern Property REIT
Why? The healthier Canadian banking system makes the lending situation there better, and this is key. Of course, the firms themselves have posted solid results, have performed well, and sport high, reliable yields. So far, so good.
What killed GGP was its inability to refinance debt coming due. Much of its operations were OK and it continued to meet current debt payments on most of its malls. For example, in Q4 of 2008, GGP posted a solid 92.5% occupancy, though cash flow suffered along with the rest of the consumer sector.
There’s plenty of potential for more trouble with the commercial REITs. Per Deutsche Bank, two thirds of about $154 billion of securitized commercial mortgages coming due between now and 2012 will not qualify for refinancing due to the 35% - 45% decline in property values since their 2007 peak. This estimate could get far uglier if even about 10% of mall properties need to be sold off. There are relatively few buyers for such big ticket properties. Thus commercial property values would drop further, thus lowering the value of the surviving commercial REITs and making financing harder still.
I won’t even get into what declining commercial property values will do to the asset values of the already battered banks that hold the mortgages, though suspension of mark-to-market accounting will help preserve appearances, at least for a while(?). So far the government has been very willing to join the banks in erecting a façade of health, so why not here too. What options do they have?

1. What Income Investors Need To Consider

First, not all REITs are created equal. The commercial sector is the most vulnerable, and the retail sector the most vulnerable of the commercial sector, though there are pockets of relative stability. Residential REITs, healthcare REITS, or even commercial office building REITs with heavy exposure to government or other very commercial stable tenants AND that have manageable debt loads will survive and ultimately prosper.
However, unless you’ve specific well researched evidence or advice suggesting otherwise, be very wary of commercial REITs, especially those with retail exposure. During the next 6-12 months, there are likely to be lots of distressed sales and the sector will be badly depressed, and that might be a time to find opportunities in which the reward justifies the risk. When that time comes, apply the following criteria when evaluating REITs.

2. Criteria for Evaluating REITs

In short, investors need to first consider if the companies have the means to manage their debt load without seeking out new financing sources. If they can do that for the next number of years to survive until things improve, then you can look at how well funds from operations exceeds current debt payments, then consider the safety of the dividend.
A. Specific Criteria Include:


  • Relative Debt Load: Again, inability to refinance is what killed GGP. Like any business comprised of big capital assets, be they power plants, pipelines, or retail malls, these firms use lots of debt. Commercial property values are likely to weaken more, making refinancing even tougher. The overriding concern is to look at various measures of the firm’s ability to meet debt obligations without seeking out new financing.
Specifically, examine:
o Debt to equity ratios: These should be much better than 1:1, because in the event of bankruptcy, costs of the bankruptcy process could consume any surplus left after creditors
o Ability to meet long term obligations coming due in the next 5 years, during which time refinancing from conventional sources at affordable rates will be hard. Specifically, what provisions have they made to pay off this debt? Have funds been set aside? When do they have any large debt coming due? How much of unused credit lines, if any, are available.
o Ability to meet short term obligations: For example, calculate the quick ratio (liquid assets/short term obligations) to see how they can manage for the next fiscal year. You want to see something much better than 1:1. In addition to this ratio, look at the actual amounts of liquid assets compared to debt payments and other obligations over the next year.

  • Income from Operations: Once you believe the REIT can survive ongoing debt and operating expenses, then look at the day to day health of the business. If the operations aren’t profitable, debt will ultimately be a problem, even if they have the cash for now.
  • Get some measure of dividend payout ratio: Once you’re satisfied they’ll survive, how safe is your dividend? Income is usually the reason for investing in REITs in the first place. In general terms, payout ratio is the actual total dividend payments divided by the total distributable cash available after covering current operations and debt payments. For very steady revenue businesses like power suppliers, we like to see payout ratios under 90%. For businesses with volatile revenues like energy producers, we want no more than 70%. For truly troubled sectors like retail REITS, the lower the better, like 60% and lower, to provide a cushion of cash for maintaining the dividend until things improve.
B. Where To Find This Data?

For those not inclined to analyze financial statements, check the Management Discussion and Analysis (aka: MD &A) included with most quarterly financial statements, which you can access on the company’s website. If still unsure, email your questions to investor relations via the email address on that website.

3. CONCLUSION

As long as people need places to live, work, and shop, the REITs will have demand. However their need for debt combined with a severe recession and concomitant decline in consumer spending makes investing commercial REITs treacherous at this time, so use the above and other criteria to carefully evaluate investments in REITs, especially commercial REITs, and especially retail REITs.

http://seekingalpha.com/article/131503-must-know-info-for-investing-in-commercial-reits-if-you-dare
 

Users Who Are Viewing This Discussione (Users: 0, Guests: 1)

Alto