Monday, August 10, 2009

Death watch or evolutionary cycle?

There's a lot of talk today about Maguire Properties handing back seven buildings to the lenders (one of which is another real estate company that bought the debt at a discount). The "imminent default" magic words language might also mean Maguire is trying to get into the hands of the special servicer, which leads to a workout or to a deed in lieu of foreclosure or something. Maguire bought these buildings at the top of the market.

Some bloggers are calling this a "commercial real estate death watch." After all, "Lending hasn’t come back, prices are plummeting and those that poured funds into the sector during real estate boom are getting killed by high vacancy rates and falling rents."

While I agree we are waiting for some properties to "die," in a sense, I take a more phoenix-like perspective to the whole thing. After all, the property is reborn by its transfer to a new owner. So I like to think of this as the bottom of an evolutionary cycle, after which a lender dumps the property to a new buyer on the cheap or holds it for a while. As I keep saying, however, the problem, at least for many prospective buyers, will be finding money, because traditional lenders are not lending much and the CMBS market -- well, we'll see when or if that phoenix arises.

1 comments:

CountingSheep said...

I had been on vacation and just checked Realty Income's (O) operating results. Things do not look too bad out there in the commercial sector.

•Revenue decreased slightly to $81.6 million from $82.1 million
•Funds from Operations (FFO) available to common stockholders increased 0.9% to $47.2 million
•FFO per share decreased 2.1% to $0.46 from $0.47
•FFO per share (before Crest’s contribution) was unchanged at $0.45
•Net income available to common stockholders per share was $0.26
•Portfolio occupancy increased to 96.6%
•Same store rents increased 0.5% to $75.3 million
•Dividends paid per common share increased 3.4%

 
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