My concern is that the banks won’t loan to CRE because they have too many bad loans on their books. Until the banks clear off the bad debt, they won’t be able to lend to CRE, Residential, Businesses, etc. like in the years past.
BosyBillups Wrote: ------------------------------------------------------- > My concern is that the banks won’t loan to CRE > because they have too many bad loans on their > books. Until the banks clear off the bad debt, > they won’t be able to lend to CRE, Residential, > Businesses, etc. like in the years past. I wouldnt say that. I know my bank for one is always ready to lend to a good looking commercial RE deal as always. residential RE is another story however.
Where are you located though? All real estate is local
true, that state of Michigan and Detroit are pretty much as bad as you can get right now. I feel I can use that on an MBA essay one day to help set myself apart, ha.
Man, Detroit has been hit hard, huh? It’s one of the few places not in a real estate bubble (I guess outsourcing, i.e., motor industry, doesn’t benefit everyone). I read where 3 bedroom homes were being auctioned for 20K! The contrarian in me says to jump on these, as it can’t get more depressed than that.
I think you have a point BB, but I think that sort of thing will hit the other sectors listed a lot harder than it will hit CRE. This comes from the fact that the buyers of subordinate CMBS tranches (B-Buyers) are very niche players, and make it a point to know all of the properties inside and out. Furthermore, they’re allowed to kick specific loans from the collateral pools. They essentially take the stance that they are ready to own any loan that defaults. This adds some confidence from the investors’ perspective, making commercial loans easier to move on average. Not that our market is doing well, we just have some natural dstribution advantages that will help us through… And also, I work for a national lender and we feel the same way about continued originations (maybe not in Detroit though…).
BosyBillups Wrote: ------------------------------------------------------- > Man, Detroit has been hit hard, huh? It’s one of > the few places not in a real estate bubble (I > guess outsourcing, i.e., motor industry, doesn’t > benefit everyone). I read where 3 bedroom homes > were being auctioned for 20K! The contrarian in > me says to jump on these, as it can’t get more > depressed than that. Yeah I read that article and actually have a former coworker on the selling end so it is true that some houses are that cheap. That being said, many of them are in neighborhoods I wouldnt live in if you gave me a house to live in for free. Not exactly the safest areas of Detroit. Hence why I am a fan of exercising my second amendment rights. I see it as eliminating ‘unsystematic risk’. But yeah there are baragins not only in the city but in nice suburbs as well. If I wasnt young and trying to stay mobile I’d be a great time to buy.
On a fundamentals basis, we’re at about the peak of the RE cycle in CRE. I think there’s a good argument for a slow slide in values AND fundamentals over the next couple of years. It varies by region and product type, but there’s been some over-supply in some places. Other places (like Orange County office, home to 389705289347 subprime mortgage originators and servicers) will also take a hit because of market dynamics. Tighter lending on the conduit lenders’ part will mean that property owners take out more loans from balance sheet lenders (as they have been doing for the last 6 - 9 months). Balance sheet lenders are more conservative, on average, than the conduit lenders have been in the last few years. Tighter lending should translate into moderately lower cap rates. Flat to lower NOI would mean even lower values. Also, ahahah, B-piece buyers have purchased complete garbage in the past for the purposes of re-packing into a CDO. And, while loan kick-outs exist NOW and used to exist, nobody was really kicking loans out of deals between 2004 and 9 months ago. At least, not if they wanted to win the B-piece bid to fuel their CDO origination engine. As far as getting into real estate with the CFA designation, it really depends on the shop. Some RE PE shops and RE finance places will really respect the designation. RE developers - not so much. Property management? No. Even places like JLL, CBRE, etc. won’t really respect it that much. Appraisal can earn you an okay living, particularly if you strike out on your own, but it’s the rare appraiser that earns well in excess of $100K. Personally, I wouldn’t touch appraisal work with a 10 foot pole. But, to each their own. I know the larger shops in the U.S. put the screws to their appraisers to produce. I’m talking all-nighters, major deadlines, etc. Basically sounds like a hellish way to go, particularly if you have 10+ years under your belt and are no longer a “grunt.” Ha.
cfa2grunt Wrote: ------------------------------------------------------- >Tighter lending should translate into > moderately lower cap rates. Flat to lower NOI > would mean even lower values. Wouldn’t cap rates tick up not down?
hobbes928 Wrote: ------------------------------------------------------- > cfa2grunt Wrote: > -------------------------------------------------- > ----- > >Tighter lending should translate into > > moderately lower cap rates. Flat to lower NOI > > would mean even lower values. > > Wouldn’t cap rates tick up not down? Yes.
Yes, sorry. Was thinking values and goofed on the direction. Values are going down, cap rates should tick up somewhat.
Apparently CBRE do support the CFA via the new investment analyst scheme in 2008. http://portal.cbre.eu/portal/page/portal/graduates/investment_analyst.html http://portal.cbre.eu/portal/page/portal/graduates/grad_detail_martin.html
Nobody I know at CBRE in the U.S. has even thought about doing the CFA. Not sure if the above is a new thing, firm-wide, or just in Europe.
When I worked at CBRE (London) there was talk about changing times and need for more training on the investment analyst side - structuring deals etc - this programme was only in consideration stages.
cfa2grunt Wrote: ------------------------------------------------------- > Also, ahahah, B-piece buyers have purchased > complete garbage in the past for the purposes of > re-packing into a CDO. And, while loan kick-outs > exist NOW and used to exist, nobody was really > kicking loans out of deals between 2004 and 9 > months ago. At least, not if they wanted to win > the B-piece bid to fuel their CDO origination > engine. Of course, I was just trying to point out that it’s easier for CMBS shops to clear out inventory then for other ABS products because throughout the process, the origination side is thinking about how a group of people are going to critique the loan individually and will know exactly how it works (or doesn’t work as you pointed out…). That certainly isn’t the case with Credit Cards, RMBS, Accounts Recievable, etc…