Friday, April 17, 2009

CRE Developments

Obviously there have been some news this week, and I've been unfocused on the markets with little time to comment or share thoughts.

GGP filing is the big one, despite the fact that it has been widely anticipated for quite some time and is still trading above it's lows set pre-bankruptcy. It was a little surprising to see a fair amount of the bankruptcy remote SPEs that own the malls run by GGP included in the bankruptcy filing, but I think some folks' conclusions are a little too early and may prove to be wrong. At the end of the day, even though it is a bunch of malls, their CMBS is low-levered and has great cash flow.

That being noted, I spent a fair amount of time while traveling this week reading other blogs while squinting at a PDA and waiting on some form of transit. I'm a strong supporter of many well written blogs, and generally believe they provide a better source of information than the legacy news organizations. You cannot even compare the innacurate and insufficient 'news' from sources such as Johnathan Weil's columns in Bloomberg to a well-argued and fact-supported blog entry from the likes of Zero Hedge or Calculated Risk. Even some linkfest format blogs are well thought-out, and can be useful. However, occasionally you catch the blogs that you really like stepping outside the bounds of their knowledge and jumping on the journalistic hysteria bandwagon, and it's just ashame (sorry no links, but the initials are ZH and CR).

But I digress, some other stuff happened this week too. Vacancies increased, Beige Book was released and was negative, The Donald saying things like you'd have to be dumb not to be buying CRE (I actually saw this during the 5 minutes I was in front of a TV), and DDR put up a portfolio of 52 shopping centers up for sale.

The DDR was the most interesting, and mostly overlooked, bit in my opinion. A number of the loans are in outstanding CMBS deals from 2003ish, and more are in late 1990s transactions that have since paid down or defeased. Most are in the NE (so none of these are in the big SE portfolio that you're thinking of in CGCMT 2007-C6 - which has seen the AMs traded a fair amount in the 1Q 2009). Some of the properties are likely to be even more desirable to buyers because they can assume the loans with very generous underwriting relative to any loan they'd be able to get today. That's probably the only thing DDR has going for it - you're not really supposed to sell in the trough part of the cycle...

1 comment:

sweet! said...

This, IMHO, is just the tip of the iceberg. While corporate level debt (above SPE) may have been the justification for GGP BK, (and Ackman may make serious $$$ from this strategy--thanks to Weil, Gotshal) the undeniable fact is that a vast majority of the 2005-2007 vintage loans (CMBS or otherwise) will not have the NOI to support debt service. Its pretty simple to imagine what happens when tenants don't rent space at bogus pro-forma rent #'s. Proforma's aren't met, interest reserves are depleted, loans transition to special servicing, and HELLO writedown.