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

Imark

Forumer storico
Registrato
6 Ottobre 2006
Messaggi
16.988
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).
Dopo pranzo me lo leggo, insieme con il documento che mi hai inviato venerdì... ;)
 

paologorgo

Chapter 11
Registrato
2 Maggio 2004
Messaggi
4.129
Località
Carpi - MO -
questo è un "catastrofista", ma i suoi articoli, che leggo da tempo, contengono spunti interessanti...

Imminently, Zero Hedge will present some of its recently percolating theories about some oddly convenient coincidences we have witnessed in the commercial real estate market. However, for now I focus on some additional facts about why the unprecedented economic deterioration and the resulting epic drop in commercial real estate values could result in over $1 trillion in upcoming headaches for financial institutions, investors and the administration.

When a month ago I presented some of the projected dynamics of CMBS, a weakness of that analysis was that it did not address the issue in the context of the CRE market's entirety. The fact is that Commercial Mortgage Backed Securities (or securitized conduit financings that gained a lot of favor during the credit bubble peak years for beginners) is at most 25% of the total commercial real estate market, with the bulk of exposure concentrated at banks (50%) and insurance companies' (10%) balance sheets.

But regardless of the source of the original credit exposure, whether securitized or whole loans, the core of the problem is the decline in prices of the underlying properties, in many cases as much as 35-50%. When one considers that with time, the underlying financings became more and more debt prevalent (a good example of the CRE bubble market is the late-2006 purchase of 666 Fifth Avenue by Jared Kushner from Tishman Speyer for $1.8 billion with no equity down), the largest threat to both the CRE market and the bank's balance sheet is the refinancing contingency, as absent yet another major rent/real estate bubble, the value holes at the time of maturity would have to be plugged with equity from existing borrowers (which, despite what the "stress test" may allege, simply does not exist absent a wholesale banking system nationalization).

The refinancing problem thus boils down to two concurrent themes: The first is the altogether entire current shut down in debt capital markets for assets, which affects all refinancings equally (for the most immediate impact of this issue see General Growth Properties (GGP) which was not able to obtain any refinancing clemency on the bulk of its properties). The government is addressing this first theme through all the recently adopted programs that are meant to facilitate general credit flow. Readers of Zero Hedge are aware of our skepticism that these are working in any fashion, especially with regards to lower quality assets. The second theme is the much more serious and less easily resolved issue of the negative equity deficiency on a per loan basis, which is not a systemic credit freeze problem, but an underwater investment problem.
This analysis focuses on the second theme. The reason for this focus is that there seems to be an unfortunate misunderstanding in the market that lenders will simply agree to roll the maturities on non-qualifying loans, and that the expected percentage of loans that need special lender treatment is low, roughly 5-10% of total loans. In reality the percentage of underwater loans at maturity is likely to be in the 60-70% range, meaning that refi extensions could not possibly occur without the incurrence of major losses for lenders.

In order to demonstrate the seriousness of the problem it is important to first present the magnitude of the refinancing problem. To quote from an earlier post as well as data from Deutsche Bank (DB), and focusing on the CMBS product first, there are approximately $685 billion of commercial mortgages in CMBS maturing between now and 2018, split between $640 billion in fixed-rate and $45 billion in floating rate. The figure below (click to enlarge) demonstrates the maturity profile by origination vintage. As noted previously, vintages originated in the pre-2005 bubble years are likely much less "threatening" as even with the recent drop in commercial real estate values, the loans are still mostly "in the money".



As Zero Hedge has pointed out previously, the biggest CMBS refi threat occurs in the 2010-2013 period when 2005-2007 vintaged loans mature. These loans, originated at the top of the market, of which the Kushner loan for 666 Fifth Avenue is a brilliantly vivid example, have experienced 40-50% declines in underlying collateral values, and the majority will have material negative equity at maturity (if they don't in fact default long before their scheduled maturity). Of these loans, only a small percentage will qualify for refinancing at maturity.

At this point cynical readers may say: well even if all CMBS loans are unable to be rolled, it is at most $700 billion in incremental defaults. Is that a big deal - after all that's what the government prints in crisp, brand new, sequentially-numbered dollar bills every 24 hours (give or take). Well, the truth is that CMBS is only the proverbial tip of the $3.4 trillion CRE iceberg. To get a true sense for the problem's magnitude one has to consider the banks and life insurance companies, which have approximately $1.7 trillion and roughly $300 billion in commercial loan exposure.

Banks have $1.1 trillion in core commercial real estate loans on their books according to the FDIC, another $590 billion in construction loans, $205 billion in multifamily loans and $63 billion in farm loans. The precise maturity schedule for these loans is not definitive, however bank loans tend to have short-term durations, and the assumption is that all will mature by 2013, exhibiting moderate increases in maturities due to activity pick up over the last 2-3 years.

Adding the life insurance company estimate of $222 billion in direct loans maturing through 2018 per the Mortgage Bankers Association, increases annual maturities by another $15-25 billion.

In summation as presented below (click to enlarge), the total maturities by 2018 are just under $2 trillion, with $1.4 trillion maturing through 2013.





Combining all sources of CRE asset holdings demonstrates the true magnitude of this problem. The period of 2010-2013 will be one of unprecedented stress in the CRE market, and a time in which banks will continue taking massive losses not only on residential mortgage portfolios but also on construction loan portfolios, the last one being a possible powder keg: Foresight Analytics estimates C&L loan losses at a staggering 11.4% in Q4 2008.

And the bad news continues: there is a risk that commercial mortgages will under-perform CMBS loans, and delinquency rates for bank commercial mortgages will be magnitudes higher than those for comparable CMBS. The figure below (click to enlarge) demonstrates the underperformance of bank commercial mortgages: as of Q4 2008 the delinquency rate for CMBS was less than half of bank CRE exposure.



Reflecting on this data should demonstrate why the administration is in such full-throttle mode to not only reincarnate credit markets at all costs (equity market aberrations be damned) but to boost credit to prior peak levels, explaining the facility in providing taxpayer leverage to private investors who would buy these loans ahead of, and at maturity. Absent an onslaught of new capital, there is simply nowhere that new financing for commercial real estate would come from and the entire banking system would crash once the potential $1 trillion + hole over the next 4 years becomes apparent, as there is less and less capital left to fill the ever increasing CRE cash black hole.

An attempt to estimate the number of loans that would not conform for refinancing, based on two key criteria of cash flow and collateral presents the conclusion that roughly 68% of the loans maturing in 2009 and thereafter would not qualify. The amount of refinanceable loans is important because borrowers will either be unwilling or unable to put additional equity into these properties. Instead borrowers will be faced with either negotiating maturity extensions from lenders or simply walking away from properties. And despite the banks' and the administration's promise to the contrary, loan extensions will not provide the way out (see below, click to enlarge), meaning losses taken against CRE is only a matter of time.

For the purposes of the refi qualification analysis, the criteria that have to be met by an existing loan include a maximum LTV of 70 (higher than current maxima around 60-65), and a 1.3x Debt To Service Coverage Ratio (equivalent to a 10 year fixed rate loan with a 25 year amortization schedule and an 8% mortgage rate).



The simple observation is that nearly 68% of loans in the next 4 years will not qualify for a refinancing at maturity putting the whole plan to merely delay the day of reckoning indefinitely at risk of massive failure.

The underlying premise of maturity extension as a solution to a loan's qualifying problem is that during the extension period the lender is either able to increase the amortization on the loan by some means (i.e. increasing the interest rate and using the extra cash flow to accelerate the loan's pay down), or achieve value growth sufficient to allow the loan to qualify by the end of the extension period. As the equity deficiency for many loans is far too large to be tackled by accelerating the amortization over any period of time, and as for "value growth", with hundreds of billions in distressed mortgage building up over time via these same extensions (even if successful), the likelihood of property price appreciation is laughable: the flood of excess supply of distressed mortgages to hit the market is about to be unleashed.

Then there is the logical aspect: maturity extensions merely delay the resolution and push the problem down the road. And as for CMBS, the issue of extension may be dead on arrival - not only are CMBS special servicers limited to granting at most two to four year maturity extensions, but AAA investors are already mobilizing to stanch any more widespread extensions as a means of dealing with the refi problem.

And, at last, there is the view that the refi problem could fix itself, based on the argument that CRE cash flows are likely to rebound quickly as the economy begins to improve due to pent-up demand. This argument is nonsense: even if cash flows recover to their peak 2007 levels, values would still be down 30% as a result of the shift in financing terms. Ironically, it would require cash flows rebounding far beyond their peak levels to push values up sufficiently to overcome the steep declines. This is equivalent to predicting (as the administration is implicity doing) that the market will be saved by the next rent and real estate bubble, which the U.S. government is currently attempting to generate.

In this light, anything that the government can try to do, absent continuing to print massive amounts of dollars, is irrelevant. The equity market can easily go up indefinitely, short squeezes can be generated at will, TALF can see 10 new, increasingly more meaningless permutations, the administration can prepare worthless stress tests that are neither stressing nor testing, and talk up a storm on cable TV to convince regular investors that all is well, yet none of these will do one thing to provide the banks and CMBS borrowers with the massive capital they will need to plug the value gap either during a CRE loan's term or at maturity.
The multi-trillion problem is simply too massive to be manipulated and is also too large to be simply swept under the carpet for the next administration and generation. It is inevitable that the monster hiding in the closet will have to be addressed head on, and the sooner it happens, the less the eventual destruction of individual and societal net worth (however, it still would be massive). Delaying the inevitable at this point is not a viable option: Zero Hedge hopes the administration realizes this, ironically, before it is too late.

Gratitude to Deutsche Bank for data.

http://seekingalpha.com/article/133...-commercial-real-estate-time-bomb-now-ticking
 

Imark

Forumer storico
Registrato
6 Ottobre 2006
Messaggi
16.988
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).
Il filone è interessante. A spanne, mi sembra un ragionamento corretto, e quello che va a detrimento dei CMBS investors tornerebbe a tutto vantaggio degli equityhoders di GGP, anche se poi si dovrà vedere se l'additional leverage avente quale collaterale i mall aventi performance positiva sui quali non si fa foreclosure (poiché si ricevono canoni eccedenti le rate dei loans pagate dagli SPE) possa essere effettivamente ottenuto, ed in che misura, in un mercato in cui il collaterale potrebbe avere valore declinante e la perfomance positiva nel medio periodo resta da verificare (bisognerebbe verificare meglio fattori quali 1) possibile andamento delle rate dei finanziamenti pagati, e 2) possibile tenuta nel tempo della capacità di quei mall di generare canoni di locazione commerciale).

Il report è a pagamento, il riassunto è gratis... interessante anche l'ultima parte...


Fitch Revises Outlook to Negative on 20 U.S. CMBS Deals after GGP Bankruptcy

21 Apr 2009 12:58 PM (EDT)


Fitch Ratings-New York-21 April 2009: Fitch Ratings has revised the Rating Outlook to Negative from Stable on 96 U.S. commercial mortgage-backed securities (CMBS) classes across 20 transactions.

The revised Rating Outlooks are in large part due to the Chapter 11 bankruptcy filing of General Growth Properties (GGP) and certain affiliates which are borrowers in CMBS transactions on April 16, 2009. GGP is a Chicago-based real estate investment trust (REIT) engaged in acquiring, developing, renovating and managing regional malls and shopping centers in major and middle markets throughout the United States. 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.

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.

A spreadsheet detailing the 20 affected transactions can be found at 'www.fitchratings.com' under the following headers:

Structured Finance >> CMBS >> Special Reports

Fitch is currently taking no additional actions on 20 other transactions with exposure to GGP loans included in the bankruptcy filing. Of these, 10 transactions have either an immaterial concentration of GGP loans or have had prior rating actions taken that incorporated deteriorating performance of the assets.

10 additional transactions do not currently have Rating Outlooks assigned.

These transactions will be placed 'Under Analysis' and be reviewed by Fitch within 30 days. Fitch will continue to monitor the performance of the GGP assets in addition to the progress of the bankruptcy proceedings. As the developing situation becomes clearer and as property performance warrants, Fitch will take additional ratings actions as appropriate


PS: Non ho ancora letto il documento che mi hai mandato per e-mail, mi accingevo a farlo...
 

Imark

Forumer storico
Registrato
6 Ottobre 2006
Messaggi
16.988
questo è un "catastrofista", ma i suoi articoli, che leggo da tempo, contengono spunti interessanti...

Imminently, Zero Hedge will present some of its recently percolating theories about some oddly convenient coincidences we have witnessed in the commercial real estate market. However, for now I focus on some additional facts about why the unprecedented economic deterioration and the resulting epic drop in commercial real estate values could result in over $1 trillion in upcoming headaches for financial institutions, investors and the administration.

When a month ago I presented some of the projected dynamics of CMBS, a weakness of that analysis was that it did not address the issue in the context of the CRE market's entirety. The fact is that Commercial Mortgage Backed Securities (or securitized conduit financings that gained a lot of favor during the credit bubble peak years for beginners) is at most 25% of the total commercial real estate market, with the bulk of exposure concentrated at banks (50%) and insurance companies' (10%) balance sheets.

But regardless of the source of the original credit exposure, whether securitized or whole loans, the core of the problem is the decline in prices of the underlying properties, in many cases as much as 35-50%. When one considers that with time, the underlying financings became more and more debt prevalent (a good example of the CRE bubble market is the late-2006 purchase of 666 Fifth Avenue by Jared Kushner from Tishman Speyer for $1.8 billion with no equity down), the largest threat to both the CRE market and the bank's balance sheet is the refinancing contingency, as absent yet another major rent/real estate bubble, the value holes at the time of maturity would have to be plugged with equity from existing borrowers (which, despite what the "stress test" may allege, simply does not exist absent a wholesale banking system nationalization).

The refinancing problem thus boils down to two concurrent themes: The first is the altogether entire current shut down in debt capital markets for assets, which affects all refinancings equally (for the most immediate impact of this issue see General Growth Properties (GGP) which was not able to obtain any refinancing clemency on the bulk of its properties). The government is addressing this first theme through all the recently adopted programs that are meant to facilitate general credit flow. Readers of Zero Hedge are aware of our skepticism that these are working in any fashion, especially with regards to lower quality assets. The second theme is the much more serious and less easily resolved issue of the negative equity deficiency on a per loan basis, which is not a systemic credit freeze problem, but an underwater investment problem.
This analysis focuses on the second theme. The reason for this focus is that there seems to be an unfortunate misunderstanding in the market that lenders will simply agree to roll the maturities on non-qualifying loans, and that the expected percentage of loans that need special lender treatment is low, roughly 5-10% of total loans. In reality the percentage of underwater loans at maturity is likely to be in the 60-70% range, meaning that refi extensions could not possibly occur without the incurrence of major losses for lenders.

In order to demonstrate the seriousness of the problem it is important to first present the magnitude of the refinancing problem. To quote from an earlier post as well as data from Deutsche Bank (DB), and focusing on the CMBS product first, there are approximately $685 billion of commercial mortgages in CMBS maturing between now and 2018, split between $640 billion in fixed-rate and $45 billion in floating rate. The figure below (click to enlarge) demonstrates the maturity profile by origination vintage. As noted previously, vintages originated in the pre-2005 bubble years are likely much less "threatening" as even with the recent drop in commercial real estate values, the loans are still mostly "in the money".



As Zero Hedge has pointed out previously, the biggest CMBS refi threat occurs in the 2010-2013 period when 2005-2007 vintaged loans mature. These loans, originated at the top of the market, of which the Kushner loan for 666 Fifth Avenue is a brilliantly vivid example, have experienced 40-50% declines in underlying collateral values, and the majority will have material negative equity at maturity (if they don't in fact default long before their scheduled maturity). Of these loans, only a small percentage will qualify for refinancing at maturity.

At this point cynical readers may say: well even if all CMBS loans are unable to be rolled, it is at most $700 billion in incremental defaults. Is that a big deal - after all that's what the government prints in crisp, brand new, sequentially-numbered dollar bills every 24 hours (give or take). Well, the truth is that CMBS is only the proverbial tip of the $3.4 trillion CRE iceberg. To get a true sense for the problem's magnitude one has to consider the banks and life insurance companies, which have approximately $1.7 trillion and roughly $300 billion in commercial loan exposure.

Banks have $1.1 trillion in core commercial real estate loans on their books according to the FDIC, another $590 billion in construction loans, $205 billion in multifamily loans and $63 billion in farm loans. The precise maturity schedule for these loans is not definitive, however bank loans tend to have short-term durations, and the assumption is that all will mature by 2013, exhibiting moderate increases in maturities due to activity pick up over the last 2-3 years.

Adding the life insurance company estimate of $222 billion in direct loans maturing through 2018 per the Mortgage Bankers Association, increases annual maturities by another $15-25 billion.

In summation as presented below (click to enlarge), the total maturities by 2018 are just under $2 trillion, with $1.4 trillion maturing through 2013.





Combining all sources of CRE asset holdings demonstrates the true magnitude of this problem. The period of 2010-2013 will be one of unprecedented stress in the CRE market, and a time in which banks will continue taking massive losses not only on residential mortgage portfolios but also on construction loan portfolios, the last one being a possible powder keg: Foresight Analytics estimates C&L loan losses at a staggering 11.4% in Q4 2008.

And the bad news continues: there is a risk that commercial mortgages will under-perform CMBS loans, and delinquency rates for bank commercial mortgages will be magnitudes higher than those for comparable CMBS. The figure below (click to enlarge) demonstrates the underperformance of bank commercial mortgages: as of Q4 2008 the delinquency rate for CMBS was less than half of bank CRE exposure.



Reflecting on this data should demonstrate why the administration is in such full-throttle mode to not only reincarnate credit markets at all costs (equity market aberrations be damned) but to boost credit to prior peak levels, explaining the facility in providing taxpayer leverage to private investors who would buy these loans ahead of, and at maturity. Absent an onslaught of new capital, there is simply nowhere that new financing for commercial real estate would come from and the entire banking system would crash once the potential $1 trillion + hole over the next 4 years becomes apparent, as there is less and less capital left to fill the ever increasing CRE cash black hole.

An attempt to estimate the number of loans that would not conform for refinancing, based on two key criteria of cash flow and collateral presents the conclusion that roughly 68% of the loans maturing in 2009 and thereafter would not qualify. The amount of refinanceable loans is important because borrowers will either be unwilling or unable to put additional equity into these properties. Instead borrowers will be faced with either negotiating maturity extensions from lenders or simply walking away from properties. And despite the banks' and the administration's promise to the contrary, loan extensions will not provide the way out (see below, click to enlarge), meaning losses taken against CRE is only a matter of time.

For the purposes of the refi qualification analysis, the criteria that have to be met by an existing loan include a maximum LTV of 70 (higher than current maxima around 60-65), and a 1.3x Debt To Service Coverage Ratio (equivalent to a 10 year fixed rate loan with a 25 year amortization schedule and an 8% mortgage rate).



The simple observation is that nearly 68% of loans in the next 4 years will not qualify for a refinancing at maturity putting the whole plan to merely delay the day of reckoning indefinitely at risk of massive failure.

The underlying premise of maturity extension as a solution to a loan's qualifying problem is that during the extension period the lender is either able to increase the amortization on the loan by some means (i.e. increasing the interest rate and using the extra cash flow to accelerate the loan's pay down), or achieve value growth sufficient to allow the loan to qualify by the end of the extension period. As the equity deficiency for many loans is far too large to be tackled by accelerating the amortization over any period of time, and as for "value growth", with hundreds of billions in distressed mortgage building up over time via these same extensions (even if successful), the likelihood of property price appreciation is laughable: the flood of excess supply of distressed mortgages to hit the market is about to be unleashed.

Then there is the logical aspect: maturity extensions merely delay the resolution and push the problem down the road. And as for CMBS, the issue of extension may be dead on arrival - not only are CMBS special servicers limited to granting at most two to four year maturity extensions, but AAA investors are already mobilizing to stanch any more widespread extensions as a means of dealing with the refi problem.

And, at last, there is the view that the refi problem could fix itself, based on the argument that CRE cash flows are likely to rebound quickly as the economy begins to improve due to pent-up demand. This argument is nonsense: even if cash flows recover to their peak 2007 levels, values would still be down 30% as a result of the shift in financing terms. Ironically, it would require cash flows rebounding far beyond their peak levels to push values up sufficiently to overcome the steep declines. This is equivalent to predicting (as the administration is implicity doing) that the market will be saved by the next rent and real estate bubble, which the U.S. government is currently attempting to generate.

In this light, anything that the government can try to do, absent continuing to print massive amounts of dollars, is irrelevant. The equity market can easily go up indefinitely, short squeezes can be generated at will, TALF can see 10 new, increasingly more meaningless permutations, the administration can prepare worthless stress tests that are neither stressing nor testing, and talk up a storm on cable TV to convince regular investors that all is well, yet none of these will do one thing to provide the banks and CMBS borrowers with the massive capital they will need to plug the value gap either during a CRE loan's term or at maturity.
The multi-trillion problem is simply too massive to be manipulated and is also too large to be simply swept under the carpet for the next administration and generation. It is inevitable that the monster hiding in the closet will have to be addressed head on, and the sooner it happens, the less the eventual destruction of individual and societal net worth (however, it still would be massive). Delaying the inevitable at this point is not a viable option: Zero Hedge hopes the administration realizes this, ironically, before it is too late.

Gratitude to Deutsche Bank for data.

http://seekingalpha.com/article/133...-commercial-real-estate-time-bomb-now-ticking
Ti ha risposto lui... sarà dura ottenere cash via additional leverage ...

Grazie: devo dire che un'esposizione così crystal clear sulle prospettive del comparto non l'avevo ancora letta... avendo sentito la puzza, intuivo la presenza del cadavere ... è una balena che sta andando in decomposizione... :D
 

Imark

Forumer storico
Registrato
6 Ottobre 2006
Messaggi
16.988
E diamo anche un recente upgrade sul possibile andamento dei prezzi delle abitazioni in USA... secondo Fitch, vi sarà un calo ulteriore del 12,5% rispetto a fine 2008, con un ritorno dei prezzi ai livelli del 2002, ed un timing per cui tale bottom sarà toccato verso fine 2010.

La stima rivede in senso pessimistico quella formulata 6 mesi prima.


Fitch: U.S. House Prices to Drop Another 12.5% Before Hitting Bottom

23 Apr 2009 9:00 AM (EDT)

Fitch Ratings-New York-23 April 2009: U.S. home prices will fall an additional 12.5% from 2008's year end values before exhibiting more stability in late 2010, according to Fitch Ratings. This forecast reflects a reversion to early 2002's prices. Currently, prices are hovering around levels seen in mid 2003.

Fitch revised its projection from earlier expectations of a 10% further decline as of second quarter-2008 (2Q'08). The revision to Fitch's October 2008 forecast is due to the extremely weak economic factors in the fourth quarter of 2008, said Group Managing Director and U.S. RMBS group head Huxley Somerville.

'Very weak employment, limited re-financing opportunities and turbulent financial markets have extended into the first months of 2009, while government initiated programs have yet to yield any positive benefits,' said Somerville.

To date, national home prices have declined by 27%. Fitch's revised peak-to-trough expectation is for prices to decline by 36% from the peak price achieved in mid-2006. The additional 9% decline represents a 12.5% decline from today's levels. The 36% peak-to-trough decline is up from the forecast 30% decline reported in October 2008.

Fitch believes that most of the correction will be incurred in the next two years, with prices exhibiting more stability from late 2010. Fitch's forecast analysis assumes 1.5% inflation rate for 2009 and 2010 and 3% for the following three years.

Within the next few weeks, Fitch will release a state-by-state forecast of home price declines.

Fitch's forecast is primarily based on its expectation that home prices will return closer to the long-term historical mean, which has been the pattern of prior home price cycles.

Given the volatile economic conditions, Fitch will continue to review its forecasts to ensure they are still accurate and provide updates every six months. Fitch's revised forecast will be incorporated in all new RMBS analysis, as well as the surveillance of existing Fitch-rated RMBS transactions
 

paologorgo

Chapter 11
Registrato
2 Maggio 2004
Messaggi
4.129
Località
Carpi - MO -
Grazie: devo dire che un'esposizione così crystal clear sulle prospettive del comparto non l'avevo ancora letta... avendo sentito la puzza, intuivo la presenza del cadavere ... è una balena che sta andando in decomposizione... :D
beh, sapevi che lo seguivo, quindi... :sad: :lol:

The Wall Street Journal has made available a report by Deutsche Bank on the outlook for commercial real estate. The presentation is an eye-opener, as it presents a lot of data on the weakening commercial real estate market. The report's key conclusions are as follows:

  • Prices may drop 35-45% in 2009, exceeding price declines of early 1990s
  • "Demand shock" has caused downturn, not excess supply (this was different in early 1990s)
  • Delinquencies could rise to 6% in 2010, matching peak delinquency rate of early 1990s
  • Maturity default rather than term default is top risk, as refinancings will require more equity
George Soros has been quoted as saying that commercial real estate prices have not yet dropped but are likely to do so in the foreseeable future:
It is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent.
As the recession in commercial real estate deepens, it will be interesting to see whether the valuations of companies such as Vornado Realty Trust (NYSE: VNO), Boston Properties (NYSE: BXP) and Brookfield Properties (NYSE: BPO) deteriorate further. At some point, investors with a penchant for long-term value may find these companies worth a closer look.
The following are selected supporting slides from the Deutsche Bank presentation (click to enlarge):









http://seekingalpha.com/article/133127-the-coming-depression-in-commercial-real-estate
 

paologorgo

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Following up on the theme Zero Hedge discussed that the vast majority of commercial real estate backed loans have negative equity, real estate tycoon Sam Zell yesterday, in a presentation to the Milken Institute, said that "you have a scenario today where you have very few '03 to '07 financings that are above water. You have more debt than you have value." As owners of these properties have more debt than value, sales of properties over the next two to three years will be minimal as none of them would result in a deleveraging. Instead Sam Zell says "investors will buy distressed debt as these properties go into foreclosure."

Sam Zell's observation was in response to the disclosure by David Simon, CEO of SPG, that the REIT had attempted to purchase real estate from bankrupt rival General Growth Properties shortly before it filed for chapter 11. Per a Bloomberg article:
“They didn’t realize they were a distressed seller,” Simon said in a panel discussion at the Milken Institute Global Conference today in Beverly Hills, California. Few commercial real estate sales are being completed because sellers aren’t willing to take losses on their investments, Simon said.
This goes to the heart of the CRE problem: as no owners of negative equity properties are motivated to sell (why contribute equity to force a sale), existing properties will merely see continuing declining cash flows with no underlying property ownership exchanges, until either the loan defaults or the borrower (REIT xyz) files for bankruptcy as interest costs overwhelm cashflows. The last fact is the reason why Scott Minerd, CEO of Guggenheim partners said "Equity players have every reason to keep playing for time." That explains all the recent REIT dilution actions, who, together with any investors who "dollar cost average down" on their REIT positions, are merely hoping the U.S. government will be successful in reinflating the housing and rent bubbles yet again and property values rise above loan values, resulting in at least nominal equity value. For investors who like betting on those kinds of odds, Craps or even Black Jacks may be a better expression of risk appetite.


http://seekingalpha.com/article/133...cre-financings-from-2003-2007-are-above-water
 

paologorgo

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Elephant in the Stress Test Room: Commercial Real Estate Loans

The leaks surrounding the bank stress tests continued yesterday evening. The WSJ reported that 10 of the 19 banks that underwent the test will be required to raise more capital.
The Journal didn’t have any definitive list, just more of the same names being bandied about. Despite all of Warren Buffett’s praise this weekend, it still looks like Wells (WFC) is on the list though the article indicates that discussions are centered around whether it might be allowed to earn its way out as opposed to raising new capital.
All of the leaks are likely meant to diffuse the impact of the actual announcement. There may be a small flurry of activity when they finally pull away the vails but I think that most of the impact has already been discounted. The real test will come when the chosen few have to actually try and raise some money. I truly wonder if anyone in their right mind would dump any meaningful amount of money into one of them.
A separate but related article in the Journal delves a bit into the growing problem of banks’ commercial real estate exposure. This issue goes far beyond the 19 banks that were subject to the stress test. It truly goes to the heart of the regional and community banks across the country.
While bank regulators aren’t immediately applying the stress-test criteria to small and midsize institutions, banks with high commercial real-estate exposures are drawing greater scrutiny from regulators. Nearly 3,000 banks and thrifts are estimated to have commercial real-estate loan portfolios that exceeded 300% of their total risk-based capital, according to Foresight. Regulators consider the 300% threshold as a red flag, although it doesn’t necessarily mean all those banks are in danger of failing. Risk-based capital is a cushion that banks can dig into to cover losses.
While the failure of a single small bank is unlikely to cause systemic damage to the nation’s financial system, such institutions could have a big impact as a whole. Banks with commercial real-estate loan portfolios exceeding 300% of their total risk-based capital have total assets of about $2 trillion, compared with $2.3 trillion in assets at Bank of America Corp.
This truly is the elephant in the room. While it doesn’t threaten the solvency of the system it does represent a significant challenge for the FDIC and a likelihood that the government is going to have to pony up quite a lot of money to resolve these institutions. The FDIC has already this year seized several small and one fairly large institutions that it was not able to sell to another bank. This results in a larger cost to the agency than they incur when a bank buys the deposits from them.
In my opinion, the economy can’t recover quickly enough to limit much of the damage that’s likely to occur. The assumptions underlying many of the deals were too aggressive and the leverage too great thus the hits the banks would have to take to work out the loans is probably more than they can tolerate.

http://seekingalpha.com/article/135344-elephant-in-the-stress-test-room-commercial-real-estate-loans
 

paologorgo

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FDIC Continues to Sell Performing Commercial Loans at About 50% Off Book Value

When Zero Hedge previously demonstrated the results of the FDIC commercial loan auctions and the discount the Federal Deposit Insurance Corporation was willing to take in order to offload commercial loans (both non-performing and performing) from its books, the result was very startling, specifically when considered in the context of the vocal endorsement Ms. Bair had given to the PPIP's Legacy Loan program and the expected commercial loan clearing levels in the 80s and 90s. At that time, Zero Hedge concluded that it was very hypocritical for the FDIC to solicit banks in offloading loans, and for hedge funds to buy them at out of market prices (especially with taxpayer-subsidized guarantees for hedge fund purchases, compliments of the administration, Geithner and Bair).

The facts: in April, the average auction clearing price on the 331 loans the FDIC sold in January and February was 49.3%. In March, the number of loans FDIC sold in various auctions increased almost four-fold to 1,328, for a total of $470 million in book values of sales, with the average price dropping even more: the latest being at 46.4%. So much for a stabilization in the commercial real estate market.
click to enlarge



And for those who claim that this price is distorted because it includes several non-performing loans, well - we have a control for that too. Compiling just the data from performing loans gives a great auction clearing price boost to... 51%.

Yes, the same FDIC which is advocating using taxpayer money to endorse and guarantee legacy loan sales as part of the PPIP in the 80/90 cents on the dollar range, continues selling performing commercial loans at about 50% off their book value. Ms. Bair's hypocrisy continues to amaze.

http://seekingalpha.com/article/137...ans-at-about-50-off-book-value#comment-501425
 

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