This was on the Mish Shedlock website in comments: "Just had dinner with a client whose business is ranked #30 in the U.S. for buying, selling and developing CRE. They (he and his brother) own 3mil sq ft of retail.
Without my prompting, he immediately launched into a diatribe of how there is an impending collapse and default in CRE that no one is aware of and of which there is no public discussion. Without too boring a rehash, he said that all the models of the CRE big players revolve around the ABSOLUTE NECESSITY of there being ever increasing rent collections to underwrite the industry, specifically the commitments to investors and financiers.
This is nothing novel to us here but this guy essentially reiterated every musing of Mish's regarding the short term nature of CRE financing and what happens when a deflated asset has to be refinanced. Default, in a word. He enumerated the insurance companies, pension systems and owners that are going to get steamrolled as this dance plays out. He described the situation as utterly unavoidable.
He proclaimed that by 2010 we will just be getting a glimpse of where this is going.
Me, I just sipped my Scotch and was shocked to hear all this dire news. Who could have seen any of this coming?"
Sorry I didn't want to spoil the 1933 party but this is really 2009 and sometimes reality just noses in no matter how we might try to ignore it. Oh well--maybe we can string together a hat trick of rally days anyway. Remember it is only 2009 :).