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ProShares UltraShort Real Estate Message Board

  • wubbie412 wubbie412 Mar 28, 2009 11:34 AM Flag

    why i continue to hold SRS

    Of some $154 billion of securitized commercial mortgages coming due between now and 2012, about two-thirds likely won’t qualify for refinancing, Deutsche Bank predicts. Its estimate assumes decline in commercial-property values of 34% to 45% from the peak in 2007. That would exceed the price drops in the downturn of the early 1990s.
    The bank estimates the default rates on the $700 billion of commercial mortgage backed securities could hit 30% and the loss rates – which figures in the amounts recovered by lenders – could reach more than 10% the highest levels seen in the last real estate bust.
    Besides securities backed by commercial real estate loans, about $524.5 billion of whole commercial mortgages held by the nation’s banks and thrifts are expected to come due between this year and 2012. Between 40% and 45% of those loans wouldn’t qualify for refinancing in a tight credit environment, as they exceed 90% of the underlying property’s value, estimates Matthew Anderson, parter at Foresight Analytics. Today, lenders generally wont make loans that account for more than 65% of a peropterty’s value.

    from the cover story of Thursday's Wall Street Journal.

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    • how high do you see SRS going again? I assume bare minimum we are looking at $70-75

    • I have been traveling a lot for work lately and since I own SRS I observe shopping strips and office building. On my two most recent trips I noticed the following:

      Southern suburbs of Washington DC. such as Renton Dulles area. Many huge office buildings completely empty. These are new and appeard to have been completed recently. They are also huge 10-20 story buildings that you could literally see through. I don't know how they are going to fill these in this economy.

      Arizona from the western outskirts of Phoenix to Prescot etc.. This area has grown emensely in the last ten years. The thing I noticed here is they seemed to have built the strip malls before the housing was built on the far reaches of these areas. A tremendous amount of these huge strip malls are in the finishing stages of construction or have just come on line. Most of these newly finished strip malls were fully rented, but the parking lots were relatively empty. It's obvious all these projects were in the works before the credit crisis really hit last fall.

      These are just my observations from some of my most recent travels but I suspect they are commom place in other parts of the country. Bottom line is from what I have observed a lot of people are going to be taking some huge hits on some of this commercial property.

      Stay tuned.

      • 2 Replies to analysist_blow648
      • The Northern VA commercial real estate market is relatively strong. Many government agencies and the contractors/consultants which support them are expanding and while space is cheaper than it has been in recent years, I do not know of any significant problems expected in this market.

        The residential real estate situation, well that's another story. Good luck selling a condo if you own one, or good luck with your HOA being able to keep up with maintenance in a half occupied building which could be uninsured (in some cases).

        Hotels are still seeing strong occupancy, inventory is being consumed as it comes on the market. DC proper is down but not significantly, ditto for Maryland.

        Can't judge CRE by Washington DC Metro. If you did you'd be chitting in your pants holding SRS.

      • I just traveled through Vegas, and some projects that were stopped including the 8 billion dollar one off the strip are back up
        and running, they will never sell the condos, or fill there vacancies, but if they got financing everyone else will to, I think there might be some huge problems down the line when they do not have enough rental income or sell enough space to make there payments. the govt is way over leveraged, and they just keep printing money and buying there own treasuries, we are not going to be in a good position by this time next year. you cant go around giving and loaning everyone money without regard on how they will pay it back, this is only a temporary fix, but the markets could rally with the good news this influx of cash into the system will cause.

    • i sound like a broken record but that analyst nailed it; the LTV issue wont disappear regardless of what they do with cost of funds. if i had my hp at home id run it for the board but suffice to say that even if they dropped rated from 5 to 3 the difference between 90 and 65 ltv will change leveraged returns by at least that would equate to a revenue reduction of approximately 35% for most reits beofre you even think about vacancy...sound like a dividend cut in the makin????

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