No avoiding the CRE elephant in the room
While there have been some "green shoots" emerging in the residential real estate market in select areas, there is nothing of the sort happening in the commercial real estate (CRE) market. Commercial lags residential during declines and recoveries, and I believe we are still deeply mired in a CRE cesspool. Of course, some of us were warning well in advance that this debacle was coming (see here, here, and here) so this shouldn't come as a surprise.
More from the New York Times today ...
"Though it came as no surprise to investors, the collapse of General Growth Properties, the nation’s second-largest mall owner, has stirred new fears about a coming debacle in commercial real estate, The New York Times’s Terry Pristin writes. The company, which owns 200 shopping centers encompassing 200 million square feet and 24,000 tenants, filed for bankruptcy protection last week.
"With the credit markets virtually shut down, General Growth said it was unable to refinance the $3.3 billion in debt that had already matured or would be due this year. These included loans totaling $900 million on two malls in Las Vegas — Fashion Show and the Shoppes at the Palazzo — that were due to be repaid in November. An additional $6.4 billion in debt matures next year.
"The global credit crisis, weakening retail demand and rising unemployment have taken a toll on commercial property around the world. At least $153 billion worth of property is already in distress, according to Real Capital Analytics, a New York research company. Of this, $87.1 billion represents defaulted mortgages, while the rest is outstanding debt from about 40 commercial-property and investment companies that have failed, most of them outside the United States."
More from the New York Times today ...
"Though it came as no surprise to investors, the collapse of General Growth Properties, the nation’s second-largest mall owner, has stirred new fears about a coming debacle in commercial real estate, The New York Times’s Terry Pristin writes. The company, which owns 200 shopping centers encompassing 200 million square feet and 24,000 tenants, filed for bankruptcy protection last week.
"With the credit markets virtually shut down, General Growth said it was unable to refinance the $3.3 billion in debt that had already matured or would be due this year. These included loans totaling $900 million on two malls in Las Vegas — Fashion Show and the Shoppes at the Palazzo — that were due to be repaid in November. An additional $6.4 billion in debt matures next year.
"The global credit crisis, weakening retail demand and rising unemployment have taken a toll on commercial property around the world. At least $153 billion worth of property is already in distress, according to Real Capital Analytics, a New York research company. Of this, $87.1 billion represents defaulted mortgages, while the rest is outstanding debt from about 40 commercial-property and investment companies that have failed, most of them outside the United States."
posted by Mike Larson at
9:01 AM
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