Risk of (Commercial) property defaults growing

[Roland99]

Source: Financial Times

There is a growing risk of defaults on loans on commercial property this year, in a trend that could spill over into tumbling values and create more jitters in the credit world, analysts and bankers warn.

US property companies that took out big short-term loans to finance acquisitions in the past couple of years at low-interest rates are now struggling to refinance this debt, as banks curb lending and commercial property prices fall.

In recent days, Harry Macklowe, the New York developer, has failed to refinance $5.8bn in short-term loans he used to buy seven Manhattan office towers from Equity Office Properties last February. Deutsche Bank, which provided the loan, has taken control of the buildings and will put them up for sale, a person familiar with the matter said.

Analysts warn of a pattern that could spread. US commercial property prices have fallen 10 per cent in some markets since August, after rising more than 90 per cent since 2001, according to Real Capital Analytics.

Read more: http://www.ft.com/cms/s/0/ad13b090-d419-11dc-a8c6-0000779fd2ac.html?nclick_check=1

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ruh roh

[alstephenson]

1. The banks conducted much better underwriting of commercial properties.

More conservative loan-to-value (rarely more than 80%), better valuations (due to FIRREA legislation), and no "teaser" rates or terms. I am in Phoenix and the commercial market is booming. I hope the Financial Times is wrong; the last time the commercial market tumbled and foreclosures soared Bush I (via the RTC), bundled all the commercial foreclosure properties in bulk sales and sold them at pennies on the dollar to his buddies on Wall Street. They then flipped the properties at market value and made a fortune. I worked for the RTC back then and that is when I became a Democrat.

[spag68]

2. If I remember correct;y,

the bush crime family was in the middle of the S&L problem also.

[Roland99]

3. Very much so.

http://en.wikipedia.org/wiki/Neil_Bush#Silverado_Savings_.26_Loan

Neil Bush was a member of the board of directors of Denver-based Silverado Savings and Loan during the 1980s' larger Savings and Loan crisis. As his father was Vice President of the United States, his role in Silverado's failure was a focal point of publicity. According to a piece in Salon, Silverado's collapse cost taxpayers $1 billion.<2>

The US Office of Thrift Supervision investigated Silverado's failure and determined that Bush had engaged in numerous "breaches of his fiduciary duties involving multiple conflicts of interest." Although Bush was not indicted on criminal charges, a civil action was brought against him and the other Silverado directors by the Federal Deposit Insurance Corporation; it was eventually settled out of court, with Bush paying $50,000 as part of the settlement, as reported in the Style section of the Washington Post <3>.

[kineneb]

4. someone just noticed this?

Mike Whitney was writing about this several months ago. Another "Duh" moment in the econ world.

[ananda]

5. Dear Bushinc:

Fuck you very much for all you have
done to destroy America, Americans,
and the world.

[Massachusetts]

8. Don't blame Bu$h

He just took advantage of an Apathetic, Ignorant and Naive Society (NOT DUers), Corrupt and Complicit Pols and Businesses.

[DissedByBush]

6. Uh oh, rich people are getting hurt

Bush, Inc., may just do something about it now.

[Roland99]

7. Morning news cycle kick