MBA Reports Increases in Commercial Loan Originations
Editor’s Note: This is an exciting sign for the commercial real estate industry. After a 2+ year decline in loan originations this is big news. This is the looming problem that people are looking at to see if it is going to really put it to the regional banks that have large exposure to this type of commercial paper. I know a large player in this space and he was elated to hear this news and he has seen a pickup in business so that could be a bight spot. Lets keep cautiously optimistic.
The Mortgage Bankers Association (MBA) reported on Tuesday that commercial mortgage originations were at a higher level during the last quarter of 2009 than in either the previous quarter or in the 4th quarter of 2008, but multifamily originations continued to lag. The data was part of the MBA’s Quarterly Survey of Commercial/Multifamily Bankers Originations.
Commercial foreclosures in Austin Texas soars 108% in 2009
2010 will be the year to watch in commercial real estate. With all the talk of full recovery in 2010, we still have a declining retail market, high unemployment and commercial loans coming due. If we can see the earnings come in where the market has priced them and jobs start getting created then maybe we will be in the clear.
But, with more debt and taxes set to be put into effect, we will see continued pressure on the U.S. consumer and that will most likely put a damper on companies plans for expansion and that will have a direct impact on the commercial real estate sector.
Hundreds of lay offs in the manufacturing industry in Austin this year are to blame for a 108-percent increase in the number of commercial foreclosures for 2009, the highest of any Texas city.
U.K. Fraud Office Arrests Six in Alleged Commercial Loan Fraud
U.K. prosecutors arrested six people and searched 19 properties in an investigation into suspected advance-fee fraud and rent fraud in the commercial property market.
The Serious Fraud Office is investigating a company operating as Gresham Ltd. and Gresham Finance (London) Ltd. that offered commercial loans of as much as 250 million pounds ($416 million), the London-based agency said today in a statement. The companies charged applicants up to 50,000 pounds for voluntary background investigations and a payment of as much as 5 percent of the face value of the loan, the SFO said. Suspected losses are at least 12 million pounds, SFO spokesman Sam Jaffa said.
Commerical real estate losses to slam GE Capital in 2010
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.
CapitalSource posts $274 million loss citing commercial loans
Editor’s Note: Most interesting piece of this news piece is that they increased their commercial loan loss reserves by over 100% . This tells me they are anticipating many more losses going forward from their commercial loan inventory.
Business Journals, Washington D.C.:
The company’s $221 million third quarter loan loss provision, which it set aside to cover loans that may have to be written off, was double the $110 million loss provision it posted a year ago.
“Despite declining charge-offs [compared to the second quarter], we increased our general provision for commercial loan losses this quarter in light of continuing stress in our commercial real estate portfolio,” said John Delaney, CapitalSource chairman and CEO in a statement.
The company’s overall assets were $14.2 billion, down 23 percent from the beginning of the year.
Source: Business Journal
Regulators give guidence to banks on troubled commercial real estate loans
These banks are going to need to start restructuring these deteriorating commercials loans or risk defaults and even larger write-downs. That will lead to the FDIC stepping in and closing the bank. I am surprise the banks are not lobbying Congress more loudly to get a program in place to refinance these loans.
The problem I assume that are making the commercial banks reluctant to restructure these loans are the fact that they were written at a higher level of valuation and if they have to rework the commercial loan to a lower valuation, the bank will need to write down their capital and that would in effect lower their capital reserves and would bring them closer to being in a situation that the FDIC would close them down.
This is why I am more convinced that once our regulators are ready to confront this problem, they will create a government sponsored program to refinance these commercial loans and in effect that would bring them off the balance-sheet of these commercial banks without making them a much higher risk of being shut down.
Even the regulators in the press release said even though there are signs of sectors in the economy recovering, it remains fragile.
Federal Reserve states banks are slow to realize commercial real estate losses
Editor’s Note: Last night on Jim Lehrer’s News Hour, they had a special on commercial real estate in New York City. It was quite a bleak picture. The commercial broker they walked around to various commercial develops said that many buildings are over 50% vacant. He went on to show a building that was financed in 2007 with only 1% down at the value of $1.7 billion dollars.
Today the same building is on the market for $600 million, he went on to say that buildings that are unoccupied are taking serious valuation hits because the lack of companies looking to sign commercial leases. In this article, is states that banks are not realizing losses on their books, in my opinion this is because they are hoping for a recovery that is most likely no happening at this point with all this bad debt still in the system. How could we possible have a recovery in the commercial market when people are calling our recovery “jobless”?
Reuters, Washington D.C. – The Federal Reserve told bank examiners last month that banks were slow to take losses on their commercial real estate loans that have suffered as property values sink.