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Fed Worries about CRE Grow
Calculated Risk —
From the WSJ: Fed Frets About Commercial Real Estate Banks in the U.S. "are slow" to take losses on their commercial real-estate loans being battered by slumping property values and rental payments, according to a Federal Reserve presentation to banking regulators last month. .... "Banks will be slow to recognize the severity of the loss -- just as they were in residential," according to the Fed presentation, which was reviewed by The Wall Street Journal. A Fed official confirmed the authenticity of the document, prepared by an Atlanta Fed real-estate ...
Costco Gives Retailers a Glimmer of Holiday Hope (Market Update)
SmartMoney.com —
... Banks are being "slow" to take losses on their commercial real-estate loans, according to a Federal Reserve presentation to banking regulators last month, the Wall Street Journal reported today. The remarks suggest that regulators are bracing for another wave of housing-related losses. LINK ...
Banks Under-reserving for Commercial Real Estate Losses
naked capitalism —
... with the recovery” drumbeat of news, and the sobering reality that a good deal of credit bubble overhang still remains to be dealt with.
One of the biggest areas is commercial real estate. Various experts, including Apollo Management’s Leon Black warned of $2 trillion in losses in the offing in the commercial real estate arena. Yet those losses seem not to have hit bank balance sheets and earnings.
The reason is simple. The Wall Street Journal tells us that banks have been dragging their feet on reserving for the losses:
Banks in ...
Further reading
FT Alphaville —
Elsewhere on Wednesday, - Wall Street’s near-death experience . - How to take advantage of Australia’s interest rate. - “Who is going to benefit from bank [property] sales ?” - The Fed’s own commercial real estate crash presentation. - A divergence in the four bad bears chart. - The EC bank debt riddle. - Lloyd Blankfein didn’t like watching Gasparino . - “It seems likely that the recovery will be less robust than desired.” - Sorkin vs Stumpf on Wachovia loan losses . - Further, further reading .
Opening Bell: 10.07.09
Dealbreaker —
Winters Shows JPMorgan Path to Safety, Dimon Shows Him the Door (Bloomberg)
Bill Winters is on the JPM payroll til January but he's actively taking calls to discuss his future, if any potential employers are interested in this kid. Fun B-Dubs fact: he took a year off during college to work in a beer-bottling plant in Croatia.
Fed Frets About Commercial Real Estate (WSJ)
"Banks will be slow to recognize the severity of the loss -- just as they were in residential," according to a Federal Reserve presentation to banking regulators last ...
Banks not worried enough about commercial real estate, Fed says
FT Alphaville —
The Wall Street Journal ran a good story on Wednesday about the Federal Reserve’s concerns that US banks have been slow to take losses on their commercial real-estate loans. According to the WSJ, the Fed expressed its concerns in a presentation to banking regulators in September: The remarks suggest that banking regulators are girding for a rerun of the housing-related losses now slamming thousands of banks that failed to set aside enough capital during the boom to cushion themselves when the bubble burst. “Banks will be slow to recognize the severity of the loss — just as ...
Office Vacancy Rate and Unemployment
Calculated Risk —
... Of course many existing office buildings were purchased in recent years at very low cap rates, with excessive leverage, and optimistic income projections. Now that prices have fallen sharply, many of these building owners are far underwater - and that will lead to more losses for lenders. See the WSJ: Fed Frets About Commercial Real Estate ...
Mortgage Crisis, Part Deux
ZachStocks —
... The interest rate environment has been very favorable to banks over the past several quarters. At this point, the Fed has made it possible for banks to borrow at a near zero interest rate, which leads to profit in almost any investment. Many institutions have even plowed the money back into treasuries which yields a virtual risk-free return (albeit very small). But with Australia unexpectedly raising rates yesterday and many strategists claiming that the recession is over, the potential for a series of rate increases is becoming more ...
Wednesday Reading
The Big Picture —
Some of what I am reading today:
• Financial Reform: Lessons from 1929 (BusinessWeek)
• Will California become America’s first failed state? (Guardian)
• Fed Frets About Commercial Real Estate (WSJ)
• Why business loves Charlie Rose (CNN/Money)
• U.K. Faced ‘Bank Runs, Riots’ as RBS and HBOS Neared Collapse (Bloomberg)
• Office Rents Dive as Vacancies Rise (WSJ)
• Q&A: Joseph Stiglitz Sees Welcome Change at the IMF (Real Time Economics)
• ...
The Housing Tax Credit: NAHB Projections and more
Calculated Risk —
... , pushing down rents and leading to more commercial real estate (CRE) defaults and foreclosures - and will lead to more losses for lenders. The additional defaults associated with lower rents will probably be higher than the cost of the tax credit. From the WSJ: Fed Frets About Commercial Real Estate ...
A CRE News Summary
Calculated Risk —
... Reis reports the strip mall vacancy rate hit 10.3% in Q3 2009; the highest vacancy rate since 1992. And rents are cliff diving ... "[W]e do not foresee a recovery in the retail sector until late 2012 at the earliest." Victor Calanog, Reis director of research Hotel Occupancy: Two Year Slump And a couple of articles: From the LA Times: Hotel defaults, foreclosures rise in California From the WSJ: Fed Frets About Commercial Real Estate ...
IHB News 10-10-2009
Irvine Housing Blog —
...
New Zealand Herald
Fed Frets About Commercial Real Estate
Wall Street Journal - Lingling Wei, Maurice Tamman ...
$430 Billion in CRE Losses?
Calculated Risk —
... take massive losses on their real estate portfolios from 2010-2013. This is similar to the recent presentation by Dr. Randall Zisler, CEO of Zisler Capital Partners: A crisis of unprecedented proportions is approaching. Of the $3 trillion of outstanding mortgage debt, $1.4 trillion is scheduled to mature in four years. We estimate another $500 billion to $750 billion of unscheduled maturities (i.e., defaults). And from the WSJ in October: Commercial real-estate loans are the second-largest loan type after ...
