Reality being ignored in Commercial Real Estate

jkarolyi · 11-04-2009, 10:19 AM

Interesting move the FDIC just made regarding commercial real estate "assets"...they "will not be subject to adverse classification solely because the value of the underlying collateral declined." Many Commercial RE assets are worth .30 on the dollar, yet the FDIC is allowing them full value on the books. Scary stuff.

FDIC Adopts Guidance on Prudent Commercial Real Estate Loan Workouts | RealEstateRama

A great video that exposes Geithner's insanity:

Geithner: Tech Ticker, Yahoo! Finance

I'm starting to wonder if I should move my IRA stock funds into safer funds...I think stocks are in for a seriously royal screwing when the day of reckoning comes. I try not to be gloom and doom about things, but seriously...what is our gov't thinking?!?!

m21sniper · 11-04-2009, 10:32 AM

Ugly.

turbo6bar · 11-07-2009, 05:08 AM

Quote:

Originally Posted by jkarolyi

I'm starting to wonder if I should move my IRA stock funds into safer funds...I think stocks are in for a seriously royal screwing when the day of reckoning comes. I try not to be gloom and doom about things, but seriously...what is our gov't thinking?!?!

They are thinking about keeping the cards from falling.

I, too, am cautious about the safety of investments. I still haven't gotten into equities after dropping out in 05. I also stopped contributing to tax-deferred accounts, choosing to hold onto the cash. This may be a stupid move if inflation goes skyward, but for now, I'm staying in the deflation camp.

As far as commercial RE is concerned, many sectors are looking horrific. Some developers have completed projects while demand is very low and vacant space is abundant. When did speculation become a facet of fundamental real estate investing? The small banks holding these loans are in big trouble. Bank presidents should be placed on suicide watch.

widgeon13 · 11-07-2009, 05:50 AM

I'm guessing they are allowing the valuation to stay high to ensure real estate tax revenues don't drop precipitously as a result of lower valuation. Make any sense??

GG Allin · GG Allin's Garage

Quote:

Originally Posted by jkarolyi

I'm starting to wonder if I should move my IRA stock funds into safer funds...I think stocks are in for a seriously royal screwing when the day of reckoning comes. I try not to be gloom and doom about things, but seriously...what is our gov't thinking?!?!

I've already done this. I continue to buy into the risky stuff, but the bulk is safe. I'm just waiting for the other shoe to drop, and it's 'a' comin'.

red-beard · red-beard's Garage

I would suggest some sort of commidity, that you actually hold, like gold, or ammunition.

HardDrive · 11-07-2009, 09:22 AM

+1 on the 'other shoe dropping'.

Not touching this current 'rally'. Dead cat bounce. There is so much open commercial real estate its insane.

turbo6bar · 11-07-2009, 10:07 AM

Quote:

Originally Posted by widgeon13

I'm guessing they are allowing the valuation to stay high to ensure real estate tax revenues don't drop precipitously as a result of lower valuation. Make any sense??

I think this has more to do with maintaining book value so banks can remain solvent, in business, and thereby, reduces probability of failure and FDIC intervention. After all, the FDIC is running terribly low on funds and cannot afford further rounds of bank failures. The federal government could simple allow the FDIC access to more funds, but that might mean Wall St banks would have fewer bailout bucks for their gambling ventures.

You are right to some extent. Maintaining the pyramid scheme implies fewer borrowers will go into default. Distressed RE drags pricing downward and hurts property tax receipts.

I choose to ignore this "other shoe," as the dropping will lead us to depression and dissolution of a way of life and culture that has evolved over decades. Certainly, we do need to get back to honest living, but that medicine is awful strong.

gotta get those guns I keep talking about.

campbellcj · 11-07-2009, 10:24 AM

The building my office is in has been around 40-60% occupied lately...ie 40-60% vacant. Apparently the current owner took a bath on their purchase price and may get foreclosed. I suspect there's a lot of that kind of situation around various markets.

GG Allin · GG Allin's Garage

I mentioned it before in a similar thread, the company I work for was given 18 months free rent for the building we recently moved in to. This is a brand new 200,000 sqf facility near O'Hare that was built 3 years ago. We're the first tenant.

Jim Bremner · 11-07-2009, 10:57 AM

I've been looking for a 4-6k square foot building to buy in the Orange county/LA county border for the last two years.

I haven't seen one that is priced right.

There's a 10,000 sqft one that I would love to own. It's been for sale for THREE years. They still have not budged on the price.

The building has a goofy side yard that's 1 acre, they see it as an asset, I see it as a liability. It's been turned into a parking lot, that has decayed over 20 years. The 1 arce side lot needs to be re-paved, I do not think that the city would let someone build out on it, it buts up to a single family residential tract.

The building is *****en, It would give me 5k of room for me, 5k of room for a Tennant. A raised loading dock for two trucks. Best of all it's 2 miles away from my house in a decent area.