Financial, Real Estate, Stock Markets Trends and Current Affairs

Here is a list that I gathered last year in my attempt to guage what was on the bank's books. It may come in handy to those who are interested in the TALF. See:

1. Reggie Middleton's Overview of the Public-Private Investment Program
   
2. Reggie Middleton on PPIP, part 2
   
3. I'm headed back to DC, with blogger's opinions in hand!

Asset Backed Securities inventory from last year:

Analysis of MS write-downs 2008-09-25 00:50:05 841.57 Kb

BAC ABS Inventory 2008-02-25 06:48:09 0 bytes

BAC ABS Inventory 2008-02-25 06:48:09 0 bytes

BearStearns_ValuationModel_05February08 (version 1) ABS inventory 2008-02-07 09:42:27 1.56 Mb

C ABS Inventory 2008-02-25 06:48:19 945.84 Kb

CFC ABS Inventory 2008-02-25 06:48:29 1.05 Mb

First Franklin Monoline ABS Inventory 2008-02-25 06:44:28 0 bytes

GS ABS Inventory 2008-02-25 06:48:56 1.22 Mb

LEH ABS Inventory 2008-08-30 06:35:18 800.10 Kb

ML ABS Inventory 2008-08-30 06:36:360 bytes

Wachovia ABS Inventory 2008-08-30 06:39:410 bytes

WaMu ABS Inventory 2008-08-30 06:40:081.10 Mb

Wells Fargo ABS Inventory 2008-08-30 06:40:27 798.22 Kb

This is a (potentially) actionable intelligence note on a REIT. We have only performed a cursory analysis, but from the looks of things they are going to have some fairly material problems regarding cash flow over the next 12 months and the financing/refinancing markets look pretty bad over that same time frame. I will delve into this company further and release additional stats to professional/institutional subscribers.

March Real Estate Sector Intelligence Note 2009-03-04 11:16:36 143.74 Kb

Here is the February REIT Actionable
Intelligence Note. There has been 25% in downward price action since I
have first released the note preview. The accompanying home-made video
illustrates the reasoning behind the assumptions in the research note.
I took my 8 year old son to the mall to show him what a cyclical
economic downturn looks like, first hand.

Alexander's Actionable Research Note Retail 2009-02-19 16:16:44

Alexander's Actionable Research Note Pro 2009-02-19 16:20:08

I have released an actionable note preview for subscribers. See Actionable Note Preview 2009-02-17 09:07:09 59.25 Kb

Shaun has fulfilled his pledge of posting his personal research on SPG to the discussion forum. Registered users should click here to access it. Those who are not registered can subscribe for free here. I urge all to participate with as much feedback an input as possible. The more you contribute, the more you get back in return.

In Seeking Alpha, I responded to a comment a guy made in which he quoted the following NY Times article (this is old hat to long time blog subscribers, so you may want to skip this, for it may be redundant)...

"In 2007, Sam Zell, the billionaire Chicago investor, sold a portfolio of 573 properties he had assembled over three decades, Equity Office Properties Trust, to the Blackstone Group for $39 billion. It was the largest private equity deal in history, but Blackstone did not stop there: it immediately flipped hundreds of the buildings for $27 billion.

Today, the wreckage of those purchases is strewn across the country, from Southern California to Austin, Tex., to Chicago to New York. Many of the 16 companies that bought Equity Office buildings are now stuck with punishing debt, properties whose values are plummeting and millions of feet of office space they cannot fill. ... "
http://www.nytimes.com/2009/02/07/business/07properties.html?ref=business

On Sept. 1 2007, I said:

"I noticed that many pundits are focusing on single family residential market, most likely because it is in the news so often. It is bad, very bad. I am an ex-residential real estate investor who sold off in 2005 due to fundamentals that were totally out of whack. It appears that many do not see how precarious the commercial sector has become, with many deals being done at 2-5% cap rates (net profit yields) in Manhattan and many major metro areas, which is absolutely ridiculous considering the risk and illiquidity of these deals. The compensation for these deals are coming no where near justifying the risk. I am sure the excessive liquidity coupled with significant demand caused the cap rate compression, but the buyers fell for it assuming liquidity and demand would continue for some time. Well, corporate liquidity has just dried up, and many are stuck holding the bag with buildings that are yielding as low as half that of treasuries, yet easily quadrupling the risk. Some are even selling at lower cap rates in successful flips (reference the Blackstone purchase of Sam Zell's portfolio, which was totally overpriced, yet Blackstone managed to flip much of the portfolio over to speculators, some of which actually flipped it over to someone else at a profit - ALL in a period of a few months). This has now become nigh in impossible, but in an attempt to raise the cap rates, commercial rents have skyrocketed to all time highs in the major metro areas, causing significant pressure on corporate profits (I have inside knowledge of this affecting MAJOR public and private firms who are looking to expand and are getting squeezed).
And now, on to small residential (single family and 1-4 family residential)..."
http://boombustblog.com/200709013/Thoughts-on-the-US-Publicly-Traded-Homebuilders.html

Then I said in December 2007:

"Of course commercial real estate is going to fall. Why? For the exact same reason residential real estate is falling. But, there hasn't been an oversupply of commercial real estate, you say. Well, the oversupply is not the core reason why residential is falling right now. Residential RE's problem is that easy, cheap money brought upon wreckless, imprudent speculation from players who were not well versed in the real estate game - and even those who should have known better. The current oversupply is a byproduct of that liquidity induced speculation. Why split hairs? Because the devil is in the details. The downfall of CRE is the rampant speculation that caused many to significantly overpay for assets that are quite illiquid and take significant expertise and time to improve (or even sell), even incrementally. Not only did they overpay, but they applied significant leverage as well, much more than the industry norm.

A Quick Commercial Real Estate Primer: Pricing Commercial Real Estate

There are several ways to price and value CRE, but the simplest and most straight forward is the capitalization rate (cap rate). "

http://boombustblog.com/Reggie-Middleton/22-Will-the-commercial-real-estate-market-fall-Of-course-it-will.-22.html

Then I said later on that month in 2007:

"My first post on my blog in September warned about the coming drop in real estate prices. I revisited the topic a couple of weeks ago, as I prepared the research of a short position in the sector. Well, we are almost done with the research and the position and I will release a summary of the research and the performance (expected and actual) of the position after Christmas.

In the meantime, this is a tidbit gleaned from my studies. We literally modeled and valued 260 properties of a certain REIT (each model is about 65 pages long, and very detailed and analytical - in real terms, no fluff here) that came up in a scan for CRE participants with bad numbers. We canvassed brokers, institutional data sources, sellers and buyers (9 sources in total) to get a detailed understanding of the lease rates, climate, and sentiment of the geographic area of each individual property. This is probably one of our the most ambitious works this year, and makes for extremely informative reading for those who have a real interest in the sector. We covered 41 states 2 countries and a whole lot of cities, all accurate to within a distinct business district of each property, where available.

What I found was that, at least where this REIT operates, the commercial real estate bubble (yes, there was an easy money induced bubble) peaked in Q4'05, where the spread between new leases and existing leases maxed out at about $5.30/ft. This spread actually went negative in Q4'06, and that negative margin increased substantially."

http://boombustblog.com/component/option,com_myblog/show,Do-you-remember-when-I-said-Commercial-Real-Estate-was-sure-to-fall-.html/Itemid,0/

Then the work began with GGP:

"A couple of weeks ago I informed BoomBustBlog.com readers that I was working on a big project concerning commercial real estate short candidates. I stated last year that I was sure CRE was headed down, hard. Well, I am now ready to start releasing the results of my research over the next week or so. Unfortunately, the market has moved against the subject of my research fiercely as I was completing it, but it appears to be far from over. Who is the subject of that research, you ask? General Growth Properties (GGP). I have actually seen this company pop up in the media and a few discussion groups from time to time, but they have no idea what the management of this company has been up to. First, a little background on how I got here. Those who are not versed in commercial real estate valuation are urged to read my quick and dirty primer on CRE valuation .

I told members of my analytical team to screen the commercial real estate trust, service, and development sector for the usual suspects, starting with the the guys that purchased Sam Zell's flipped properties from Blackstone. I made some of the companies available via blog post and download: icon Commercial Real Estate Cos. (43 kB). icon Forest City Enterprise Peer Comparison (198.98 kB), icon Vonardo Realty Trust (146.49 kB). After and exhaustive screen and resultant short list, we chose GGP. I then instructed the team to canvass local and national brokers (4), databases (5) and data aggregators (several) to get the most precise localized rental and expenses figures possible. This data, as well as purchase dates, prices, management actions, capital improvements, etc. were used to plug into models such as this 33 page illustrative example, icon GGPs Woodlands Village (612.34 kB), to ascertain the true value of GGP's portfolio. We also measured and valued their development operations, joint ventures, CMBS financing, off balance sheet vehicles and master planned communities. Sum total, I now have roughly 2 gigabytes of "REAL" valuation data on my servers covering 260 properties owned or partly owned by GGP. A this point, I may know more about their operations than they do.

What is more telling is the window of understanding this opens into the commercial real estate space in the US. It is my opinion that most are extremely over-optimistic regarding the prospects for this space. "

http://boombustblog.com/content/view/108/34/

The whole story is hear (1,000's of pages), from $60 per share in Nov. 2007, to $0.40 per share now:

http://boombustblog.com/20080615425/GGP-and-the-type-of-investigative-analysis-you-will-not-get-from-your-brokerage-house.html

Well, I have another REIT short report warning coming out next week after the stimulus plan is released, as well as a bank and an insurer (check my track record in these matters: http://boombustblog.com/20090108749/BoomBustBlog-Research-Performance-for-2008.html).

Anyone interested is advised to enlist the RSS feed to my blog or two create a subscription (there's a free option for those who don't feel compelled to pay for my work).

One year after these artcles:

• Will the commercial real estate market fall? Of course it will.
• Do you remember when I said Commercial Real Estate was sure to fall?
• The Commercial Real Estate Crash Cometh, and I know who is leading the way!
• Generally Negative Growth in General Growth Properties - GGP Part II
• General Growth Properties & the Commercial Real Estate Crash, pt III - The Story Gets Worse
• More on GGP: A Granular View of Insider Selling and Lease Rate Growth
• GGP part 5 - The Comprehensive Analysis is finally here

We go to the MSM to get these articles:

U.S. Developers Seek Their Own Bailout: Big property developers are asking to be included in a new $200 billion loan program as a surge in commercial mortgages comes due.

• • Report: Commercial Real Estate Outlook
  • General Growth Gives Concession to Banks

A few months after this article: In the Great Global Macro Experiment, the next bubble to burst is...

we get this one from the MSM, Hedge Funds Dump NYC Real Estate: One should always live beneath one's means.

One year after these artcles:

• Will the commercial real estate market fall? Of course it will.
• Do you remember when I said Commercial Real Estate was sure to fall?
• The Commercial Real Estate Crash Cometh, and I know who is leading the way!
• Generally Negative Growth in General Growth Properties - GGP Part II
• General Growth Properties & the Commercial Real Estate Crash, pt III - The Story Gets Worse
• More on GGP: A Granular View of Insider Selling and Lease Rate Growth
• GGP part 5 - The Comprehensive Analysis is finally here

 We go to the MSM to get these articles:

U.S. Developers Seek Their Own Bailout: Big property developers are asking to be included in a new $200 billion loan program as a surge in commercial mortgages comes due.

• • Report: Commercial Real Estate Outlook
  • General Growth Gives Concession to Banks

A few months after this article: In the Great Global Macro Experiment, the next bubble to burst is...

 we get this one from the MSM, Hedge Funds Dump NYC Real Estate: One should always live beneath one's means. 

One year after these artcles:

• Will the commercial real estate market fall? Of course it will.
• Do you remember when I said Commercial Real Estate was sure to fall?
• The Commercial Real Estate Crash Cometh, and I know who is leading the way!
• Generally Negative Growth in General Growth Properties - GGP Part II
• General Growth Properties & the Commercial Real Estate Crash, pt III - The Story Gets Worse
• More on GGP: A Granular View of Insider Selling and Lease Rate Growth
• GGP part 5 - The Comprehensive Analysis is finally here

 We go to the MSM to get these articles:

U.S. Developers Seek Their Own Bailout: Big property developers are asking to be included in a new $200 billion loan program as a surge in commercial mortgages comes due.

• • Report: Commercial Real Estate Outlook
  • General Growth Gives Concession to Banks

A few months after this article: In the Great Global Macro Experiment, the next bubble to burst is...

 we get this one from the MSM, Hedge Funds Dump NYC Real Estate: One should always live beneath one's means.