Thursday, February 5, 2009
Clueless CMBX Investor (but Clueless has still made a lot of money over the last year, maybe he's just playing dumb.)
CRE TBI cliff diving
CRE and Resi are so different in so many ways, I don't understand why folks try to draw corollaries.... The whole article should be trashed based on the headline alone, but the conclusion is wrong too.
Some other Resi folks who aren't quite in tune with the CRE market, but do manage to speak with great confidence and authority:
From Christmas, CR informs the world that he knows nothing about CRE when he is caught off guard that all properties are put into special purpose entities and loans are non-recourse...
I hate to be speculative without seeing the actual Cushman & Wakefield report quoted in the NYTimes, but I'm guessing we're talking about two different locations when comparing the cost of retail space in Manhattan. Obviously, retail space that is leasing for over $2k per square foot (i.e. 666 Fifth Avenue to Abercrombie and Diesel's space at 685 Fifth) should sale for more than $3k per square foot.
Till mixing? I appreciate this guy's writing style, but he lost me a few times with the analogies. You are absolutely not supposed to mix the tills if you have multiple properties with different SPEs for each. People do. Michael B Smuck did, once a couple of decades ago, and again in 2007, and as the resi author indicates, he failed miserably.
CRE loans do not default because property values decline, unless they mature and cannot get refinanced. Hardly any CMBS loans mature until after 2010. Your property value could go to $0, and if you are still bringing in more rent than your expenses, you continue to operate.