2010 Commercial Real Estate Forecast

in economy Gold Gold Market by admin — January 28, 2010 1:04 pm | no comments

Fortunately for President Obama, he didn’t have to deliver the State of Commercial Real Estate Address last night… Because if he did, there is no amount of spin that he could have used to put a good face on the reality of the situation: commercial real estate is a disaster in the making. In fact, that point was only underscored earlier this week when the owners of the Stuyvesant Town apartment complex announced they would default on the $4.4 billion in loans they used to buy the property at the peak of the commercial bubble. Now, some four years later, that deal has soured just like the rest of them, as falling rents and plummeting real estate values have turned their big purchase into a no-win situation for everyone involved. Advertisement Our Most Profitable Mistake of 2010 We don’t mind owning up when we’re wrong. But this time, the mistake we made… is making our readers a killing. You see, when we first published reports on the amount of oil in the domestic Bakken formation, we were working with figures of about 4.35 billion barrels. But an industry insider has just estimated more than that. 100% more, to be exact. And it’s got our newest Bakken stock skyrocketing. Keep reading about our “profitable gaffe,” and how it could be the easiest money you make in 2010. That left Tishman Spenser and Blackrock with their only option: handing the keys back to the lender after missing a $16.1 million interest payment and watching the value of their property fall 65% from the peak. Left with a property now worth only $1.9 billion, they simply threw in the towel in one of the most expensive cases of jingle mail on record. 2010 Commercial Real Estate Forecast But let’s face it, the Stuyvesant Town debacle is just one of the many strategic defaults headed down the pike right now, especially in a down economy. In that regard, says Aaron Bryson, an analyst at Barclays Capital, “Stuytown is a poster child for the type of aggressive lending that characterized CMBS at the peak of the market. This is a prime example of these types of loans not working out, and we expect a lot more to come.” Unfortunately, Bryson is not alone… FDIC Chair Shelia Bair expects the rates of delinquent CRE loans to continue to rise “in the coming quarters,” and she reiterated her belief this week that many more bank failures will occur as a result. What’s more, she says: “There’s not a whole heck of a lot we can do about it.” In fact just last Friday, regulators shut down five more banks in New Mexico, Oregon, Washington, Florida, and Missouri — bringing the count of U.S. bank failures so far this year to nine. And guess what? Commercial real estate losses were responsible for a majority of those failures, according to the Federal Deposit Insurance Corp. “A lot of them were saddled with commercial real estate loans that went sour. You couple that with weak regional market conditions, and that…