Using Veritas to Construct the "Per…

29-04-2017 Hits:82213 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:77822 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:77395 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:82135 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:78729 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:81017 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:47899 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:79729 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:79245 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:79799 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:84802 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:81733 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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My first post on my brand new blog about 6 momths ago started with a warning about the commercial real estate market and obscenely low cap rates. A� few months later I revisited the topic with a couple of anecdotal posts...

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I then noticed how the mainstream media and blogs started to catch on...

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Then I decided to share my proprietary research� on a particular REIT and its market...

  1. The Commercial Real Estate Crash Cometh, and I know who is leading the way!
  2. Generally Negative Growth in General Growth Properties - GGP Part II
  3. General Growth Properties & the Commercial Real Estate Crash, pt III - The Story Gets Worse
  4. More on GGP: A Granular View of Insider Selling and Lease Rate Growth
  5. GGP part 5 - The Comprehensive Analysis is finally here
  6. My Response to the GGP Press Release, which seems to respond to blogs...
  7. For those who were wondering what sparked that silly press release from GGP...
  8. GGP: Foreclosure vs Asset Sale
  9. GGP Refinancing Sensitvity Analysis
  10. GGP part 7 - Share value under the foreclosure analysis
  11. GGP part 8 - The Final Anaysis: fire sale of prime properties

�

It appears that now, the price movement in CRE and CMBS is unmistakeably negative. To begin with, it takes money to buy buildings and when you buy buildings you increase demand which drives prices up. This has happened fervently for the last four or five years, driving prices high and cap rates low. So, what happens when you can't find the money to buy the buildings anymore? I'm an equity/real estate guy, but I do look around and ask questions on the fixed income side every now and then.

�Below is a chart of� the AAA cmbs index. The spread is out to around +280. I am told that these are around a seven year duration security, with each 100 bps eqauting to about 7 points (very roughly). This index was +80 one year ago, and +280 is a loss of around 15 points off of par (100). �
Additionally this is the top of the heap in terms of quality.�

 

sg2008021128840.gif


This is the A rated stuff.� This equates to $55 - $60 dollar price according to the bond traders. Think about it, and investment grade security losing that much of its value.

sg2008021129468.gif
I looked at teh BBB and BB charts at markti.com and they look so steep as to be unreal.�

�The GGP links above in the beginning of this post are well researched and should make very clear where the underlying is headed. GGP is not the only REIT/investor in a bind. So who has this stuff on their books? See Bear Stearns, Morgan Stanley, Ambac and MBIA - to start with. In the case of Bear Stearns:

Deal Type Min Rating Total
CMBS A $227,477,273

AA $83,459,000

AAA $466,812,629

B $21,524,000

BB $80,214,000
� BBB $427,298,000
CMBS Total CMBS Total $1,306,784,902

�

This is not a comprehensive glimpse of BSCs holdings, only about 25% of it, as insured by the two major monolines. They also have a very large chunk of "unidentified" securities which I think sports a very significant contigent of CMBS derivatives.

Add this to their other real estate related holdings then apply the marks that you see in the charts above and you have quite a few billion dollars of writedowns coming down the pike...

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�The actual underlying indexes are showing losses as well... From the MIT site.

�MIT's commercial property price index shows its second straight quarterly decline

Indicates seven percent drop in commercial property since summer

February 5, 2008

The value of U.S. commercial real estate owned by big pension funds fell another 5 percent in the fourth quarter of 2007, according to an index produced by the MIT Center for Real Estate.

The drop in the quarterly transaction-based index (TBI), which tracks the price at which big pension funds buy and sell properties like shopping malls, apartment complexes and office towers, was the second straight quarterly decline. It was deeper than the 2.5 percent drop in the third quarter, and it means the cumulative fall since last year's midsummer peak is now more than 7 percent.

"This is evidence that the commercial property market continued to fall, and at an accelerated rate, through the last quarter of 2007, no doubt due to the effects of the credit crunch," said MIT Center for Real Estate Director David Geltner.

The TBI, based on properties sold from the National Council of Real Estate Investment Fiduciaries (NCREIF) data base, grew 64 percent from 2004 through 2006, then had another 8 percent spurt in the first half of 2007. The decline in the second half of 2007 still leaves commercial property prices at their level of a year ago, a level that was considered historically high at the time.

"If this is as far as it goes, the price decline we see so far in commercial property as reflected in the TBI may simply represent a correction of the froth that occurred in early 2007 as a result of very aggressive commercial mortgage underwriting practices," said Geltner.

The TBI measure of total returns for the year 2007 was 3.7 percent, which simply reflected operating income, with prices basically unchanged. Despite the upsurge in the first half of the year, this was the poorest calendar year annual performance for the index since 1992, when commercial property experienced its worst crash since the Great Depression. Index Co-Director Henry Pollakowski was quick to point out, however, that fundamentals in the commercial property market are much stronger now than they were in 1992.

"We don't have the kind of over-building we had then, and building occupancies and rents are much stronger. Commercial mortgage default rates are much lower than in the early 1990s," Pollakowski said.
The MIT Center's TBI is based on prices of NCREIF properties sold each quarter from the property database that underlies the NCREIF Property Index (NPI), and also makes use of the appraisal information for all of the more than 5,000 NCREIF properties. Such an index--national, quarterly, transaction-based, and by property type--had not been previously constructed prior to MIT's development of it in 2006. NCREIF supported development of the index as a useful tool for research and decision-making in the industry.

While the NCREIF properties well represent institutional investments such as pension funds, a second index based on a broader population of properties was subsequently developed at the MIT Center for Real Estate. That index, now published by Moody's Investor Services as the Moody's/REAL Commercial Property Price Index, will release its 4th-quarter results later this month. While the TBI represents pension funds' sales, the Moody's/REAL Index represents the broader commercial property market and includes a monthly national commercial property index.