Using Veritas to Construct the "Per…

29-04-2017 Hits:82051 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:77701 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:77271 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:82017 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:78606 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:80905 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:47784 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:79608 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:79138 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:79683 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:84640 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:81608 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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From Bloomberg: Capmark Increased Office, Hotel Loans as Zell Called Market Top

Oct. 27 (Bloomberg) -- Capmark Financial Group Inc., the lender that filed for bankruptcy this week, was making billions of dollars in property loans just as investor Sam Zell was exiting the U.S. office market in early 2007. I find this comment particularly interesting. In 2007 I wrote the following article:

  • Will the commercial real estate market fall? Of course it will. December 2007 Excerpt: "Sam Zell, one of the most successful real estate investors of our time, sold his Equity Office Properties Trust of Class A and B buildings to Blackrock for what I assuredely thought was a fools price. When I saw the numbers, I said easy money or not, there is an ass for every seat. Well, little do I know. Blackrock found someone to pass the cherry on to, and in near real time at that - and they paid even lower cap rates than Blackrock did. Hats off to the Blackrock folk. You found the guys at the very tip top of the market to drop those cap rates off on.

    Now, the problem for the last guys to buy these properties (as Sam Zell sits there smiling on his $21 billion pile of cash) is that it is going to be nigh impossilbe to find someone who will pay a ZERO cap rate, and try as you might it will be damn hard to raise lease rates amongst an economic hard landing and negative trending earnings... And thus, this is the fate of commercial real estate. The many guys who overpaid, will get burnt as values tumble from their peak bubble highs. Old school real estate guys email me and say they never even heard of 5, 6 and 7 percent cap rates until recently (after 30 years in the biz). Well, some of these guys are pushing zero (literally 1.5% to 3 and 4%).

    So I told my team to find the low cap rate buyers so we can short 'em. We, of course, started looking at the profile of those who bought from Blackrock (I mean, who wouldn't?) and then moved on when we saw that their were some entities that were in some real (and I mean real) trouble. Here are a couple of companies that we passed on because they weren't bad enough off:..."  I specifically stated that I didn't think anyone would be dumb enough to buy CRE from Sam Zell at the top of the market. I was proven wrong, then stated that there was no one stupid enough to buy properties from the guys that bought properties from Sam Zell at the top of the market. I was wrong again. Actually, there were plenty of guys with plenty of money willing to go shopping at the top of the market (just as they are doing in the equity market now). Obviously, I need to get to know more of these people. If I knew them back then, I would have been flipping CRE!!!  Speaking of those CRE guys, this is who I ended up focusing on in late 2007 - now bankrupt big time:The Commercial Real Estate Crash Cometh, and I know who is leading the way!

In 2006 and 2007, Capmark originated $60 billion in commercial mortgage loans, most for office buildings, according to the Oct. 25 bankruptcy filing. While Capmark was lending, Zell was selling Equity Office Properties Trust at the top of the market for $39 billion, including debt. And I was buying puts on soon to be bankrupt companies trading at $60 for literally pennies as all of those experts were calling me a fool for betting against the big money... Yeah, the big money like the infallible golden guys over at Broad Street...

Capmark collapsed under the weight of the loans it made and the debt that financed its leveraged buyout by a group led by Goldman Sachs Group Inc. and KKR & Co. By the time of the filing, Capmark had $18.5 billion in corporate debt, including $6.9 billion due in 2010 and $8.54 billion due in 2011, according to data compiled by Bloomberg. As commercial property prices started falling, loan defaults accelerated. Payments were at least 60 days late on $4 billion of the $24.1 billion in loans Capmark listed as managed assets on June 30. That was up 166 percent from Dec. 31.

“They were aggressive lenders and the company was highly leveraged,” said Jeffrey Rogers, president and chief operating officer of Integra Realty Resources Inc., the largest U.S. commercial real estate valuation company. Capmark, based in Horsham, Pennsylvania, is an Integra client. Whoa fella. Why didn't you tell your client this BEFORE they collapsed???

Growing Challenges

“The Capmark bankruptcy reinforces that, in the case of institutions with large concentrations in commercial real estate, current disruptions to the market have the potential to impact their viability,” said Sam Chandan, president and chief economist of Real Estate Econometrics, a property research firm in New York.

Capmark and its units owe $7.1 billion to the 30 largest creditors without collateral backing their claims, according to court documents. The three biggest are Citibank NA, with a claim of $4.6 billion; Deutsche Bank Trust Co. Americas with two claims, for $1.2 billion and $637.5 million; and Wilmington Trust FSB, with a claim of $500 million, according to court papers.

Of the loans Capmark originated, office, multifamily and retail properties account for the biggest share of those that are delinquent. Of the non-performing loans, $444.7 million were made to office buildings, $282 million to apartment owners, and $243.7 million to retail properties, as of June 30.

Hotel Properties

“After the new ownership took over in 2006, they got even more aggressive,” said Dan Fasulo, managing director of Real Capital Analytics Inc., a New York-based research firm.

Real Capital identified 234 properties with Capmark financing, 62 of which had fallen into foreclosure, default or distressed status.

Capmark said hospitality properties accounted for $2.28 billion of its portfolio of mortgages as of June 30 and $78.9 million of those were in default as of that date. Speaking of which, I need to release my opinion of the Starwood Properties (HOT) earnings release some time today. Scary reading for a company that went up 50% in price...

The properties Real Capital identified as “troubled” include a delinquent loan as of September on the Ontario Airport Marriott hotel in Southern California’s Inland Empire; a foreclosure in June on a $95 million loan to Xona Resort in Scottsdale, Arizona; and a $192.5 million loan to the Maui Prince resort in Hawaii that’s in receivership.

Capmark’s Creation

Capmark was created in March 2006, near the peak of the real estate and buyout market. The company listed consolidated debt of $21 billion and assets of $20.1 billion as of June 30, according to Chapter 11 documents filed in U.S. Bankruptcy Court in Wilmington, Delaware. Forty-three affiliates also sought protection.

Goldman Sachs, KKR, Dune Capital Management LP and Five Mile Capital Partners LLC bought 78 percent of Capmark, then called GMAC Commercial Mortgage, from General Motors Co. for $8.8 billion. The buyout consisted of $1.5 billion in cash and the repayment of $7.3 billion of debt, before GM’s sale of a 51 percent stake in the rest of its finance business, GMAC LLC.

Using credit provided by Wall Street banks, private-equity firms announced a record $1.4 trillion of deals in 2006 and 2007, according to Bloomberg data.

Dealmaking collapsed in mid-2007 as debt evaporated in the global credit crisis. All of that money lost, which could have easily been saved with just a small subscription to BoomBustBlogCool. Zell sold Equity Office, the largest U.S. office landlord with 540 properties, in February of that year to Blackstone Group LP. He made $900 million from the deal and went on to purchase the Tribune Co. for about $8.3 billion. Tribune, owner of the Los Angeles Times and Chicago Tribune newspaper, filed for bankruptcy in December 2008. Good CRE timing on Zell's part, but it was obviously a bad time to get into print media, even at what was percieved as a discount.

As the economy soured, buyout firms were left to manage assets they bought and companies from retailer Linens ‘n Things Inc. to carmaker Chrysler Group LLC sought bankruptcy protection.

Commercial Property Values

Commercial property values in the U.S. have plunged. The Moody’s/REAL Commercial Property Price Indices fell 3 percent in August from July, bringing the decline to almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19. Of course, the poster child of CRE failures due to over leverage in an over-inflated market is...  "GGP and the type of investigative analysis you will not get from your brokerage house".

Vacancies at U.S. office buildings are at a five-year high, a 23-year record for apartments and the highest since 1992 for retail centers, according to real estate research firm Reis Inc. All that unleased space makes it harder for landlords to pay their mortgages to lenders such as Capmark.

“Capmark’s ability to raise new real estate investment funds was severely constrained by adverse real estate market conditions, which have also negatively impacted the performance of the investment funds CFGI’s subsidiaries manage,” Thomas L. Fairfield, Capmark’s general counsel, said in an affidavit filed in the bankruptcy case.

Capmark struggled for months to avoid bankruptcy. In December, it applied to the Federal Reserve System to become a bank holding company, and then withdrew the application, according to Fairfield.

In March, Capmark negotiated with lenders to extend an $833 million bridge loan, Fairfield said. In September, Capmark agreed to sell its mortgage servicing unit for $490 million to Berkshire Hathaway Inc. and Leucadia National Corp.

The case is In re Capmark Financial Group Inc., 09-13684, U.S. Bankruptcy Court, District of Delaware (Wilmington).