A Tipping Point?
June 17, 2009
Almost everyone is looking for a tipping point. At this time we are looking for signs that the decline in the economy and in the financial markets is lessening and that we might be somewhere near the bottom. If this is the case then can the turn to recovery be far behind? Read more
General Growth Finally Goes Down
April 20, 2009
Early Thursday morning, the managers of General Growth Properties [GGP: 1.05, 0.00 (0.00%)] opted to file for Chapter 11 Bankruptcy protection. General Growth has been the poster child of extreme overleveraging in the real estate industry. The filing totals approximately $24 billion in debt and is the largest real estate bankruptcy in U.S. history. General Growth had been working for months to try and settle it’s debt obligations outside of bankruptcy court. It had been working with creditors to try and relax the terms of the agreements, through not paying interest and extending the time period it would have to repay the debt. However, no accross the board resolution was reached. It was only on March 31st that the front page of the Marketplace section of The Wall Street Journal had a large article on how General Growth had avoided Chapter 11. So what should you look at going forward and how will this impact the commercial real estate market in general? Read more
Do as Simon Says
April 2, 2009
Among the battered real estate industry there are a few REITs that are situated to take advantage of the carnage and profit in the long run. Simon Property Group [SPG: 72.56, -1.35 (-1.83%)] is going to be poised to snatch up properties at rock bottom prices from sellers who simply want to pay down their enormous debt loads.With a market cap of $7.59 billion, SPG is the largest public real estate company in the United States. As of December 31, 2008, SPG owned or held an interest in 324 income-producing properties in the U.S. It owns, operates and develops its portfolio of properties with an emphasis on high quality retail real estate. Read more
Making Housing Affordable Will Make Investing Unaffordable
March 12, 2009
Last week President Obama unveiled his Make Housing Affordable Plan (MHA), which helps those homeowners who either owe more money than their house is worth, or who face imminent risk of default. Those owing between 80% and 105% of their house may refinance at a low, fixed-rate for 15 or 30 years. Those who are in default or face imminent default may be eligible to restructure their mortgages with interest rates as low as 2%, loan terms as long as 40 years, and principal reductions. The government will also reduce principal by $1,000 per year if borrowers remain current on the lower, updated loan payment for up to five years. There are many who claim that this plan increases moral hazard, and will create an artificial bottom which will only temporarily delay the market from finding a true market bottom. These arguments are absolutely valid; however there are larger risks that come with the MHA, the risks to the MBS market. Read more
Homeowner Affordability and Stability Act, Is It Really Hopeful?
March 8, 2009
On Wednesday, February 18th, President Obama presented his Homeowner Affordability and Stability Act. The elements of this plan are worth complementing as well as questioning. The key components of the Affordability and Stability Act are: (1) Providing access to low-cost refinancing for responsible homeowners suffering from falling home prices, (2) Create a $75 billion homeowner stability initiative to reach 3-to-4 million at-risk homeowners, (3) Supporting low mortgage rates by strengthening confidence in Fannie Mae [FNM: 1.02, -0.01 (-0.97%)] and Freddie Mac [FRE: 1.14, -0.02 (-1.72%)]. Read more
