Commerical real estate losses to slam GE Capital in 2010

by LJ Miehe on December 9, 2009

Editor’s Note: A 13% drop in commercial real estate may be too conservative still for 2010.  I keep hearing very bullish comments from analysts but we still have interests at records lows and that can not go on forever.  Unemployment did notch down because of seasonal jobs but that still is not a permanent change and some of that gain was from the birth / death adjustments as well so I am not convinced we are out of the woods yet.

Commercial real estate losses have reached out their anti-Midas Touch and tapped the General Electric Co. The financing arm, GE Capital, is looking down the barrel of $7 billion in unrealized losses for 2009. The company announced on its annual investor day that GE Capital is anticipating a 13% drop in next year’s commercial real estate values.

GE Capital is foreseeing a flat profit for 2010 of roughly $2 billion to $2.5 billion, which will then grow in 2011. The dour predictions are mitigated by a peak in 2010. This is bittersweet, however since the peak will come and go with a 2010 price tag of $13.6 billion. Of that total, next year’s commercial real estate losses will make up $2.9 billion. This is an $800-million gain over last year’s losses.

A large portion of GE Capital’s investments are in office properties and retail shopping centers, along with other commercial holdings. The credit markets and its UK mortgage holdings seem to be showing life, according to the company, but the losses in this broader sector will continue.

General Electric recently agreed with Comcast to divest itself of NBC/Universal and is expecting $8 billion for the sale. This will not help with its 2009 numbers, as the deal will complete in 2010.


Previous post:

Next post: