|
Thursday, November 06 2008 @ 10:05 AM Central Standard Time
|
 The founder of Colony Capital, Thomas Barrack wrote the prediction that the commercial real estate market will be the next one to be hit by tsunami. This was written on his real estate private-equity firm’s October investor letter. In the credit market, commercial real estate has been the last among the continuous falls.
Do you remember the Lehman Brothers Holdings who pinned its hope on its final days for survival, planning to spin off $25 billion to $30 billion of real-estate securities into REI Global. Lehman expected 85 cents but leveraged loans were selling for 71 cents.
Commercial real estate is due for its turn, predicted by Barrack. There are lots who supposed that the subprime crisis would soon lead the market wolves to commercial loans.
This downfall in commercial real estate is truly disturbing to the economy. Total $3.7 trillion of commercial real-estate loans, including commercial mortgage-backed securities and collateralized debt obligations. Barrack predict a “refinancing crisis” in the next three years since plenty of CMBS and CDOs mature in 2010 and 2011. Sale is not a practical option with all of the refinancing issues. Barrack wrote that the volume of transaction is declining, retail center sales volumes are down 85%, office is down 75% and hotels 95%.
Barrack wrote, the list who will hurt the most include insurance companies, hedge funds and banks, specifically regional banks.
William Ackman, the founder of Pershing Square Capital Management is also included with the hurt of the campaign due to the commercial real-estate crash. The team of Ackman originated plans for two retailers–Longs Drug Stores and Target–that pivot on the underappreciated value of the companies’ real-estate holdings.
Allison Ayson
http://realestateup.com
|
|
