Comments on: Has the Real Estate Supertanker Finally Turned? http://www.biggerpockets.com/renewsblog/2009/08/31/real-estate-supertanker-finally-turned/ Learn, Network, Invest Sun, 12 Feb 2012 02:59:04 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Goudbeleggerhttp://www.biggerpockets.com/renewsblog/2009/08/31/real-estate-supertanker-finally-turned/#comment-95676 Goudbelegger Sun, 10 Jul 2011 21:35:31 +0000 http://www.biggerpockets.com/renewsblog/?p=6693#comment-95676 Nice article! I think real estate will recover sooner or later. But we were in a bubble. so it will probably be later. The global debtbubble is next to burst. That is why i put my money in gold and goldmining stocks. Nice article! I think real estate will recover sooner or later. But we were in a bubble. so it will probably be later. The global debtbubble is next to burst. That is why i put my money in gold and goldmining stocks.

]]> By: BBhttp://www.biggerpockets.com/renewsblog/2009/08/31/real-estate-supertanker-finally-turned/#comment-68713 BB Wed, 02 Sep 2009 06:20:40 +0000 http://www.biggerpockets.com/renewsblog/?p=6693#comment-68713 It seems like people's confidence flows with the stock market. Great post, I wonder if this phantom inventory will show up, or it will dribble out, or who knows... It seems like people’s confidence flows with the stock market. Great post, I wonder if this phantom inventory will show up, or it will dribble out, or who knows…

]]> By: David Repkahttp://www.biggerpockets.com/renewsblog/2009/08/31/real-estate-supertanker-finally-turned/#comment-68438 David Repka Mon, 31 Aug 2009 13:42:35 +0000 http://www.biggerpockets.com/renewsblog/?p=6693#comment-68438 The biggest problem facing commercial real estate is the capital markets' lack of liquidity. CMBS issuance went from $230 billion in 2007 to $12 billion in 2008 to less than a billion dollars YTD in 2009 Higher vacancies and higher reserves can be built into financial models to determine an underwritten cash flow (UCF). We can apply a stressed interest rate and a higher than normal debt coverage ratio to the UCF to determine very conservative maximum loan proceeds. As delightful a math exercise that might be... when there is no functioning capital market to provide liquidity, there are no transactions in some market segments. What used to get easily financed at 80% of cost now will only justify 40-60% LTC/LTV (lesser of) financing from long term investors such as insurance companies and pension funds based on the new ultra conservative underwriting standards. This makes commercial real estate a "rich man's game" once again and will knock all the amateurs out of the business. For those with massive amounts of cash and a long time horizon this is the greatest buying opportunity of our lifetimes. The only thing that can change this inevitability is government involvement in the capital markets through a program like TALF where at least the lowest risk AAA piece has liquidity once again.David [LinkedIn Open Networker with 1,511+ connections].-= David Repka´s last blog ..<a href="http://bisontales.wordpress.com/2009/08/28/about-12b-in-talf-eligible-deals-emerge-ahead-of-deadline/" rel="nofollow">About $12B In TALF Eligible Deals Emerge Ahead Of Deadline</a> =-. The biggest problem facing commercial real estate is the capital markets’ lack of liquidity. CMBS issuance went from $230 billion in 2007 to $12 billion in 2008 to less than a billion dollars YTD in 2009 Higher vacancies and higher reserves can be built into financial models to determine an underwritten cash flow (UCF). We can apply a stressed interest rate and a higher than normal debt coverage ratio to the UCF to determine very conservative maximum loan proceeds. As delightful a math exercise that might be… when there is no functioning capital market to provide liquidity, there are no transactions in some market segments.
What used to get easily financed at 80% of cost now will only justify 40-60% LTC/LTV (lesser of) financing from long term investors such as insurance companies and pension funds based on the new ultra conservative underwriting standards. This makes commercial real estate a “rich man’s game” once again and will knock all the amateurs out of the business. For those with massive amounts of cash and a long time horizon this is the greatest buying opportunity of our lifetimes. The only thing that can change this inevitability is government involvement in the capital markets through a program like TALF where at least the lowest risk AAA piece has liquidity once again.

David
[LinkedIn Open Networker with 1,511+ connections]

.-= David Repka´s last blog ..About $12B In TALF Eligible Deals Emerge Ahead Of Deadline =-.

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