Commercial Delinquencies Rise Again, Data Goes Ignored: Mortgage Bankers Association

  • Commercial Real Estate delinquency rates for loans held >30 days rose to 5.69% (as REITs continue to hit record highs)
  • CMBS debt has continued to have the highest delinquency rate of all debt by sector
  • For a reminder of the early warnings on regional bank exposure, see the Doo Doo 32
  • For my 2010 commercial real estate outlook (which thus far has been right on the money) see CRE 2010 Overview CRE 2010 Overview 2009-12-16 07:52:362.85 Mb

retail_cre_vs_cap_rate.png

Commercial Delinquencies Rise Again, Data Goes Ignored: Mortgage Bankers Association

  • Commercial Real Estate delinquency rates for loans held >30 days rose to 5.69% (as REITs continue to hit record highs)
  • CMBS debt has continued to have the highest delinquency rate of all debt by sector
  • For a reminder of the early warnings on regional bank exposure, see the Doo Doo 32
  • For my 2010 commercial real estate outlook (which thus far has been right on the money) see CRE 2010 Overview CRE 2010 Overview 2009-12-16 07:52:362.85 Mb

retail_cre_vs_cap_rate.png

Taubman Centers, Inc. 4Q09 results

TCO reported weak 4Q09 results with sagging core revenues and operating results. The rental income (minimum rents and percentage rents) declined 5.8% (y-o-y) to $92.5 mn from $98.2 mn in 4Q08. However, the decline in non-cash expenses like depreciation helped reduce the impact on bottom line from an accounting perspective with net income (excluding impairment charges and a litigation charge) declining lower 1.8% (y-o-y). Adjusted FFO which excludes the impact of non-cash items like deprecation declined 5.1% (y-o-y) to $76.6 mn from $80.8 mn in 4Q08.

Minimum rents declined 5.0% (y-o-y) to $87.1 mn from $91.6 mn in 4Q08. Average occupancy dipped to 89.5% from 90.5% in 4Q08 and average base rent declined 3.2% (y-o-y) to $42.56 PSF (per sq ft) from $43.96 PSF in 4Q08. While the tenant sales per square feet were reported to improve 3.8% (y-o-y), the percentage rents declined 17.1% (y-o-y) to $5.5 mn from $6.6 mn in 4Q08 largely owing to reduced occupancy and reduced percentage rents as % of mall tenant sales. Other revenues which include shopping centre related revenues and lease cancellation revenues dropped nearly 50% (y-o-y) to $8.4 mn from $16.8 mn in 4Q08 largely owing to negligible lease cancellation revenues of 0.5 mn against $7.5 mn in 4Q08. The decline in core revenues were offset by increase in management fees from Macao Studio City development fees as well as higher expense recoveries. Total revenues were down 1.9% (y-o-y) to $186.3 mn from $189.9 mn in 4Q08.

 

Taubman Centers, Inc. 4Q09 results

TCO reported weak 4Q09 results with sagging core revenues and operating results. The rental income (minimum rents and percentage rents) declined 5.8% (y-o-y) to $92.5 mn from $98.2 mn in 4Q08. However, the decline in non-cash expenses like depreciation helped reduce the impact on bottom line from an accounting perspective with net income (excluding impairment charges and a litigation charge) declining lower 1.8% (y-o-y). Adjusted FFO which excludes the impact of non-cash items like deprecation declined 5.1% (y-o-y) to $76.6 mn from $80.8 mn in 4Q08.

Minimum rents declined 5.0% (y-o-y) to $87.1 mn from $91.6 mn in 4Q08. Average occupancy dipped to 89.5% from 90.5% in 4Q08 and average base rent declined 3.2% (y-o-y) to $42.56 PSF (per sq ft) from $43.96 PSF in 4Q08. While the tenant sales per square feet were reported to improve 3.8% (y-o-y), the percentage rents declined 17.1% (y-o-y) to $5.5 mn from $6.6 mn in 4Q08 largely owing to reduced occupancy and reduced percentage rents as % of mall tenant sales. Other revenues which include shopping centre related revenues and lease cancellation revenues dropped nearly 50% (y-o-y) to $8.4 mn from $16.8 mn in 4Q08 largely owing to negligible lease cancellation revenues of 0.5 mn against $7.5 mn in 4Q08. The decline in core revenues were offset by increase in management fees from Macao Studio City development fees as well as higher expense recoveries. Total revenues were down 1.9% (y-o-y) to $186.3 mn from $189.9 mn in 4Q08.

 

In continuing the rant on the possibility of the US entering a stagflationary environment, as was hinted by Alcoa's quarterly  report (see "Is My Warning of the Risks of a Stagflationary Environment Coming to Fore?"), I have decided to graphically illustrate the historically most successful inflation hedges. Click graphic below to enlarge.

inflation_correlation.png

For those "gold bugs" who have never ran the numbers, gold offers less inflation protection than your house does. The same goes for WTI crude and probably most other categories of oil.

In continuing the rant on the possibility of the US entering a stagflationary environment, as was hinted by Alcoa's quarterly  report (see "Is My Warning of the Risks of a Stagflationary Environment Coming to Fore?"), I have decided to graphically illustrate the historically most successful inflation hedges. Click graphic below to enlarge.

inflation_correlation.png

For those "gold bugs" who have never ran the numbers, gold offers less inflation protection than your house does. The same goes for WTI crude and probably most other categories of oil.

Wednesday, 06 January 2010 19:00

Someone Is Paying a Lot for High Priced Doo Doo

In reviewing the banks that were originally included in the Doo Doo 32 (a list of likely doomed banks created in the spring of 2008), I decided to have a team take the devil's advocate perspective (an exercise that we normally pursue) and attempt to build a bullish case for the sectors that I viewed bearishly yet have outperformed the S&P and escaped profitable shorting during the last three quarters. The results are illuminating.

Below is a list of shortlisted banks that have reported higher returns relative to S&P 500 between the period March 9, 2009 and January 5, 2010 - the bear market rally of 2009. The methodology that we followed for this short listing is as follows:

·         We took out a list of banks that are domiciled in the US and have market capital of more than $500 million and current share price of more than $10.

·         Next we calculated returns for each bank and S&P 500 between period March 9, 2009 and January 5, 2010.

Wednesday, 06 January 2010 19:00

Someone Is Paying a Lot for High Priced Doo Doo

In reviewing the banks that were originally included in the Doo Doo 32 (a list of likely doomed banks created in the spring of 2008), I decided to have a team take the devil's advocate perspective (an exercise that we normally pursue) and attempt to build a bullish case for the sectors that I viewed bearishly yet have outperformed the S&P and escaped profitable shorting during the last three quarters. The results are illuminating.

Below is a list of shortlisted banks that have reported higher returns relative to S&P 500 between the period March 9, 2009 and January 5, 2010 - the bear market rally of 2009. The methodology that we followed for this short listing is as follows:

·         We took out a list of banks that are domiciled in the US and have market capital of more than $500 million and current share price of more than $10.

·         Next we calculated returns for each bank and S&P 500 between period March 9, 2009 and January 5, 2010.

I am here to weigh in on the increasingly popular marketing battle over GGP's (General Growth Properties) value in, and out of bankruptcy. The players in question are large buyside institutions who own opposing positions on the stock. Ackman/Pershing square, who are long the company's stock, and Hovde Capital Advisors, who are short the stock, and Reggie Middleton, the original player!

For those who follow me regularly and are familiar with my dealings with GGP, skip down to the bottom of this post to download my latest GGP analysis. For those who are not familiar with me and the BoomBustBlog, I am (to the extent of my knowledge) the first investor/media concern to go public with a short thesis on General Growth Properties (GGP) with a warning on commercial property in general, and a specific short on GGP in the 4th quarter of 2007 (see "GGP and the type of investigative analysis you will not get from your brokerage house", BoomBustBlog professional subscribers can download the entire GGP composite history in .pdf format). I am a private investor that generates his own proprietary research. It is solid, independent, unbiased, and of extreme quality when compared to the highly conflicted sell side marketing fluff proffered as research, and apparently now stands out among the buy side as well. With all due respect to the successful investors referred to herein, there is a hint of "talking one's book" within the presentations. I have absolutely no problem with self promotion, but when it appears the promotion comes to odds with the validity of the analysis, it does tend to raise my brow, and apparently the brow of several institutions that have come to me for my opinion.

So, let's take an unbiased, empirical look at GGP from the guy who first pointed out the insolvency of this company in the first place. As for the self promotion aspect, I am now offering consulting services to those who desire independent, objective analysis. I will soon be releasing a very interesting study on real estate funds and residential mortgage related products from Morgan Stanley and Goldman Sachs, which will assuredly cause their clients to fall in love with them. More on that later, though.

I am here to weigh in on the increasingly popular marketing battle over GGP's (General Growth Properties) value in, and out of bankruptcy. The players in question are large buyside institutions who own opposing positions on the stock. Ackman/Pershing square, who are long the company's stock, and Hovde Capital Advisors, who are short the stock, and Reggie Middleton, the original player!

For those who follow me regularly and are familiar with my dealings with GGP, skip down to the bottom of this post to download my latest GGP analysis. For those who are not familiar with me and the BoomBustBlog, I am (to the extent of my knowledge) the first investor/media concern to go public with a short thesis on General Growth Properties (GGP) with a warning on commercial property in general, and a specific short on GGP in the 4th quarter of 2007 (see "GGP and the type of investigative analysis you will not get from your brokerage house", BoomBustBlog professional subscribers can download the entire GGP composite history in .pdf format). I am a private investor that generates his own proprietary research. It is solid, independent, unbiased, and of extreme quality when compared to the highly conflicted sell side marketing fluff proffered as research, and apparently now stands out among the buy side as well. With all due respect to the successful investors referred to herein, there is a hint of "talking one's book" within the presentations. I have absolutely no problem with self promotion, but when it appears the promotion comes to odds with the validity of the analysis, it does tend to raise my brow, and apparently the brow of several institutions that have come to me for my opinion.

So, let's take an unbiased, empirical look at GGP from the guy who first pointed out the insolvency of this company in the first place. As for the self promotion aspect, I am now offering consulting services to those who desire independent, objective analysis. I will soon be releasing a very interesting study on real estate funds and residential mortgage related products from Morgan Stanley and Goldman Sachs, which will assuredly cause their clients to fall in love with them. More on that later, though.

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