(GuruFocus, October 27, 2009) One of the shoes that the bears wait to fall is the Commercial Real Estate. For the sector, the debts are coming to terms and banks may not be in a position to help. The occupancy rate is dropping and unit rent is declining. Asset sales deals are rare as investors do not believe the sector has hit the bottom yet.
The problem for the industry is that between now and 2013, more than $2 trillion in commercial mortgages, which typically have a five- to 10-year term, will need to be refinanced, according to a July report by Richard Parkus, head of commercial mortgage-backed securities at Deutsche Bank AG. It is not turmoil in the capital markets that is causing the bottleneck, but rather the fact that properties are not worth enough to retire the old debt in a refinancing, Parkus said.
Over the weekend, we saw Capmark Financial Group Inc. filing bankruptcy. The company is a Commercial Real estate lender and found itself having $21 billion in debt and only $20.1 billion in asset.
Fox Business News interviewed Harvey Green, CEO of Marcus and Millichap, one of the largest Commercial Real Estate brokerage firms. Harvey Green sees trouble in the sector, especially for the loans extended during 2006 and 2007 peak, but the bankruptcy may not foretell the trend in the industry. As for the $3 Trillion (Richard Parkus said “more than $2 Trillion”, it is funny to see how the media inflate the number so casually), Harvey Green sees much of that are not as leveraged and the cash is flowing for the loans, so it is not a $3 Trillion problem.
Watch Harvey Green (click here if you do not see the video player)
Watch the latest business video atFOXBusiness.com
Fox Business News aslso interviewed Joe Sitt , CEO of Thor Equities, a firm owning $3 billion of real estate across the country. Joe Sitt see pain, especially in the hotel business. A business which only rent for one night is impacted the most. “Hopefully it will come the first” he predicted.
Joe Sitt two positives factors developing for the industry: first the US Dollar depreciation against other currency will attract people from other countries (European) to the US to travel and shop; and the second is wealth created in the emerging market will bring people from those developing countries (China, India, and Brazil) to the US.
As of now, Joe Sitt is not buying yet. For him, 2010 is the magic year. “You can’t buy the lowest, but you can buy low”.
Watch Joe Sitt (click here if you do not see the video player)
Watch the latest business video atFOXBusiness.com
The problem for the industry is that between now and 2013, more than $2 trillion in commercial mortgages, which typically have a five- to 10-year term, will need to be refinanced, according to a July report by Richard Parkus, head of commercial mortgage-backed securities at Deutsche Bank AG. It is not turmoil in the capital markets that is causing the bottleneck, but rather the fact that properties are not worth enough to retire the old debt in a refinancing, Parkus said.
Over the weekend, we saw Capmark Financial Group Inc. filing bankruptcy. The company is a Commercial Real estate lender and found itself having $21 billion in debt and only $20.1 billion in asset.
Fox Business News interviewed Harvey Green, CEO of Marcus and Millichap, one of the largest Commercial Real Estate brokerage firms. Harvey Green sees trouble in the sector, especially for the loans extended during 2006 and 2007 peak, but the bankruptcy may not foretell the trend in the industry. As for the $3 Trillion (Richard Parkus said “more than $2 Trillion”, it is funny to see how the media inflate the number so casually), Harvey Green sees much of that are not as leveraged and the cash is flowing for the loans, so it is not a $3 Trillion problem.
Watch Harvey Green (click here if you do not see the video player)
Fox Business News aslso interviewed Joe Sitt , CEO of Thor Equities, a firm owning $3 billion of real estate across the country. Joe Sitt see pain, especially in the hotel business. A business which only rent for one night is impacted the most. “Hopefully it will come the first” he predicted.
Joe Sitt two positives factors developing for the industry: first the US Dollar depreciation against other currency will attract people from other countries (European) to the US to travel and shop; and the second is wealth created in the emerging market will bring people from those developing countries (China, India, and Brazil) to the US.
As of now, Joe Sitt is not buying yet. For him, 2010 is the magic year. “You can’t buy the lowest, but you can buy low”.
Watch Joe Sitt (click here if you do not see the video player)
