Implode Explode

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Tracking the many faces of the global credit implosion.
Updated: 11 min 54 sec ago

One57 ("Billionaire's Tower") could set NYC foreclosure record

Sun, 06/25/2017 - 08:08
``Yet another sky mansion is scheduled for a foreclosure auction. For the second time in a month, a property seizure is being sought at One57 on Billionaires' Row. Following a mortgage default, apartment 79, a full-floor penthouse that cost $50.9 million, is scheduled for auction on July 19, according to PropertyShark and Bloomberg. The apartment was the eighth-priciest sold in the building... "It's probably the most-expensive foreclosure we've ever seen in luxury development," Donna Olshan, president of Olshan Realty, told Bloomberg. "I don't know of a foreclosure that's larger than that."'' -- Here's the previous foreclosure.

Camden Council says hundreds of households to be evacuated in wake of London tower fire

Sat, 06/24/2017 - 08:11
``Some 800 households will be evacuated from five apartment towers Friday night in London, according to Councillor Georgia Gould, leader of Camden Council. Residents will have to live elsewhere for four to six weeks while external cladding on the buildings is removed... The government said Thursday it is testing 600 high-rises across England, in the wake of the fire at Grenfell.''

Economists draw mixed conclusions over May new home sales report

Fri, 06/23/2017 - 15:01
"Despite May's good news, new home sales still have a long way to go to reach historic norms," Trulia Chief Economist Ralph McLaughlin said. "When taking into account the U.S. population, new home sales are still about 69% of the long-run average."


"Ultimately this report is a disappointment for those looking to builders to meaningfully help solve the pressing supply issues in the market overall, especially for entry-level buyers," Zillow Chief Economist Svenja Gudell said. "The median price of a new home sold in May was close to $350,000, by far the highest it's ever been and likely well beyond the budget of younger, first-time buyers that make up a sizable portion of the market right now."

Trump Still Making Millions As De Facto-Slumlord of Massive Brooklyn Housing Complex; But Will It Lose HUD Status With Carson As Boss?

Wed, 06/21/2017 - 08:16
Starrett City, a sprawling complex of 46 buildings and 5,881 apartments that sits far out in Brooklyn on the edge of the Belt Parkway, is the nation's biggest federally subsidized apartment development.

U.S. Department of Housing & Urban Development officials say Starrett City has received $491.7 million in federal subsidies since May 2013, including $76.8 million last year and $38.3 million so far this year.


The [HUD inspection score] drop from 89 to 70 put Starrett City closer to the score of 60 HUD deems unacceptable. HUD can terminate a contract with a landlord with two scores of 60.


The difference from past inspections is that HUD is now run by Trump's appointee, Ben Carson.

The drop from 89 to 70 put Starrett City closer to the score of 60 HUD deems unacceptable. HUD can terminate a contract with a landlord with two scores of 60.


Complex spokesman Bob Liff emphasized that Trump plays no role in managing the complex. Trump's father, Fred, was a limited partner when it was built in 1974 and Trump and his siblings inherited that interest when his father died.

The 4% stake Trump holds was placed in a trust shortly before he became President Jan. 20.


Trump's receipt of income from Starrett City creates a potential conflict for Carson, who will have ultimate say over HUD's next score of the complex.

During his confirmation hearing, Carson wouldn't answer directly when asked if he would make sure Trump and his family didn't make any money via his agency.

Fed is Careening Into Housing and Stock Bubble... Look Out Below! - Ben Hunt

Tue, 06/20/2017 - 15:11
What has happened (and apologies for the ten dollar words) is that the Fed's reaction function has flipped 180 degrees since the Trump election. Today the Fed is looking for excuses to tighten monetary policy, not excuses to weaken. So long as the unemployment rate is on the cusp of "instability", that's the only thing that really matters to the Fed (for reasons discussed below). Every other data point, including a market sell-off or a flat yield curve or a bad CPI number -- data points that used to be front and center in Fed thinking -- is now in the backseat.

I'm not the only one saying this about the Fed's reaction function. Far more influential Missionaries than me, people like Jeff Gundlach and Mohamed El-Erian, are saying the same thing. If you think that this Fed still has your back, Mr. Investor, the way they had your back in 2009 and 2010 and 2011 and 2012 and 2013 and 2014 and 2015 and 2016 ... well, I think you are mistaken. I think Janet Yellen broke up with you this week.

San Francisco and tech driven housing mania: The median home in San Francisco reaches a new high of $1.5M

Tue, 06/20/2017 - 11:49
``Home prices are up nearly $300,000 in one year simply because San Francisco is going through a housing mania.  Tech valuations are off the charts and there seems to be this belief that prices will never come down.  The consensus seems to think that buying real estate at any given point is a smart move.  They simply cannot foresee a correction in the cards. ''

China's "Ghost Collateral" Arrives In Canada, "Heralding A Crisis"

Tue, 06/20/2017 - 08:23
... the stunner: "Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C."


The Vancouver Sun adds that as a result of tighter federal lending rules, borrowers trying to buy million-dollar-plus properties in Vancouver's market "are increasingly taking out dangerous loans from shadow bankers in a fast-growing and poorly regulated financial market."


"These properties in Vancouver are so expensive that you need people either laundering money or loan fraud or people borrowing such large amounts of money that should never be allowed, in order to keep it going," MacBeth said. "If everyone is reporting their incomes honestly in Vancouver, there is no way that housing prices can stay where they are.

Ten years since the global financial crisis, world still suffers 'debt overhang'

Mon, 06/19/2017 - 10:31
Today, the scars of the global financial crisis remain. There have been trillions of dollars in losses. And in a world of subpar economic growth, even optimists are downbeat about whether the economic medicine has been taken...

Firstly, excessive debt. In the aftermath of the world market crash, rather than pushing for debt destruction, world leaders used fiscal and monetary policy to fan demand. Global debt now stands at a staggering US$215 trillion.

The Swift, Shocking Collapse Of Theresa May And The Tories

Sun, 06/18/2017 - 14:19
Many of those [apparent Kremlin-sanctioned] murders took place while Theresa May was the Home Secretary and she herself has intervened in some of these cases. She personally intervened to protect "international relations" with Russia in delaying the investigation into the death of Alexander Litvinenko. She also was involved in the government's decision to withhold evidence in the death of another Russian, Alexander Perepilichny.

In addition, May has reduced the police budget by nearly $3 billion as part of the Conservatives' austerity budget and a switch in focus to anti-terrorism efforts. A number of senior police officials blame those cuts for reduced capabilities, especially in pursuing difficult investigations that these murders required.

That push for austerity also was a major factor in the next disaster to befall May and that was the horrific fire at the Grenfell tower. Apparently, the private building manager that the council had employed to upgrade the building used cladding that is banned in the US and Germany specifically because of the fire hazard. Using fireproof cladding would have cost just an additional 5,000 pounds.

Higher prices squeezing renters, would-be homeowners, study finds

Fri, 06/16/2017 - 17:59
A diminished supply of available homes is swelling prices in large U.S. metro areas from New York to Miami to Los Angeles, squeezing out would-be buyers and pushing up rents as more people are forced to remain tenants.


The tight supply of homes and a shortage of affordable rental housing have improved little in recent years for a variety of reasons. Among the key factors is that construction has yet to regain the pace of homebuilding that predated the bust.

"As the economy continues to recover, as income picks up as household formations pick up, it's not spurring a supply response," said Chris Herbert, managing director of Harvard's Joint Center for Housing Studies. "It's a worsening of the situation that was evident last year."

The real fascinating thing is the "not spurring a supply response" part. That suggests to us that there's a huge amount of corporate trepidation about the economy (and at this point, namely, that it's about to fall off a cliff...)

Vornado, Related and Skanska finalize deal to build $1.6B Moynihan Train Hall, Extending & Upgrading Ailing Penn Station (NYC)

Fri, 06/16/2017 - 15:12
``Vornado Realty Trust, Related Companies and Skanska have finalized a deal with the state to build a $1.6 billion train hall at James A. Farley Post Office, paving the way for construction to begin. State officials announced the deal on Friday, roughly nine months after the companies were named the preferred design-build team for the project. The Empire State Development Corp., the state agency leading the development, inked a financial agreement with the team that requires $550 million from the state, $630 million from the developers and $420 million from Amtrak, the MTA and federal funds.'' -- See also this article for new renderings.

As London Tower Smolders, Outrage Spreads in Divided Society

Fri, 06/16/2017 - 09:18
The inferno that ripped through the 24-story tower in the small hours of Wednesday morning left at least 17 people dead, dozens in the hospital and many more missing. For devastated locals, some still searching for loved ones, it was emblematic of how they have been abandoned by an uncaring government that spent the last seven years slashing spending on vital services.

"Austerity went up in those flames," said Sarah, a retiree who was born and brought up in London and was going past the area on the tube when she decided to stop and help. "We're not looking at a building, we're looking at a graveyard," added Siobhan, who works with children. The two women, who had just met on Thursday, didn't want to give their surnames.

Changes in Cuba policy could adversely impact Trump¹s hotel competitors

Fri, 06/16/2017 - 08:35
``... the decision to prohibit business with GAESA to direct tourists to private companies and AirBnB is an example of Trump's ability to impact his business' competitors while in the White House. Trump's prohibition, in effect, puts other hotel companies on equal footing with his personal company -- not allowed to pursue future business in Cuba. ''

Grenfell Tower Death Toll Rises to 17; U.K. Government Is Criticized

Thu, 06/15/2017 - 13:41
Under pressure from critics, Prime Minister Theresa May ordered a public inquiry on Thursday into the lethal fire that turned a West London apartment tower into a pillar of charred rubble and that raised anxieties about safety procedures and construction materials in high-rise buildings.

The death toll from the fire, which began early Wednesday, rose to 17 and is certain to climb further, the authorities warned. As of late Thursday afternoon, 30 people remained in hospitals, including 10 in critical condition. Many residents, possibly dozens, remained unaccounted for.

Officials have been racing to check other high-rise apartment blocks, even as investigators comb what is left of the building, Grenfell Tower, with help from search dogs. A police commander, Stuart Cundy, said of the toll, "I'd like to hope that it isn't going to be triple figures."

Among the key questions: Did a "stay put" protocol, which told people to remain in their apartments until firefighters arrived, delay residents' escape? What role did exterior cladding, installed as part of a renovation completed last year, play in the fire's rapid spread? Should older buildings -- Grenfell Tower was completed in 1974 -- have to be retrofitted with sprinklers and alarm systems?


Mrs. May announced the inquiry shortly after the mayor of London, Sadiq Khan, asked for one, and as questions arose about the role of Gavin Barwell, who was housing minister until last week, when he lost his bid for re-election to Parliament. He is now Mrs. May's chief of staff.

Critics say that a much-needed review of fire safety regulations -- demanded after a deadly fire at an apartment block in Camberwell, in Southeast London, in 2009 -- had languished under his watch.

Greeks Promised Economic Boost Despair of Seeing Debt Deal

Wed, 06/14/2017 - 10:51

Across the country in places like Corinth, an industrial hub about 80 kilometers west of Athens, Greeks have spent years treading water as news bulletins bombard them daily with reports of meetings and decisions in Brussels and Frankfurt that will determine their economic future. In the meantime, as the ECB's stimulus measures -- including its asset-purchase program -- buoy the rest of the euro-area economy, Greece's output has been stagnant, leaving its people the most pessimistic in the region.

Yet the ECB remains unlikely to include Greek bonds in its QE program in the foreseeable future, according to a person familiar with the matter. That's because a meeting on Thursday of euro-area finance ministers, whose electorates are leery of debt relief, looks like delivering another fudge. There may be agreement to disburse more bailout loans but without easing repayment terms enough to satisfy the ECB and International Monetary Fund.

That would leave Tsipras high and dry. The debt has acted as a brake on growth at a time when Greeks should have the chance to rebuild their lives, he wrote in an article published in Le Monde and Die Welt on Wednesday.

See also this article on a greater-than-60% spike in foreign buying of Greek properties.

1031 Exchange, a Cherished Real Estate Tax Break, Faces Extinction

Wed, 06/14/2017 - 08:31
A much-loved tax advantage in the commercial real-estate industry is on the chopping block even as chances dim for the passage of a broad federal tax overhaul this year. Why? If a sweeping bill doesn't get traction in Congress, there is still a decent chance a narrower tax rate cut will get passed, according to lobbyists and Capitol Hill officials working on tax legislation.''


The 1031 exchange could effectively have ended as part of the tax-overhaul plan proposed last year by House Republicans, which gained traction after Donald Trump was elected President. But that plan--named "Better Way"--would have included other provisions that would have made it more palatable for the real-estate industry.

Now real estate lobbyists say the Better Way plan is getting bogged down and it is looking like the real-estate industry might have to take the medicine without the spoon of sugar to help it go down even though they would benefit from the lower rates.


real estate executives say getting rid of 1031 exchanges would be devastating for the economy as well as their industry. Like-kind exchanges are used in 10% to 20% of commercial real-estate transactions, according to Green Street.

They also have sparked the creation of a cottage industry of firms that pool 1031 exchange investments for smaller investors. If the provision is eliminated, "it would cause a lot of transactions not to occur," said Jeffrey DeBoer, chief executive of the Real Estate Roundtable.

The economic impact would ripple throughout the economy because investors who acquire real estate through 1031 exchanges are more likely to invest in those properties than those that pay cash. In such trades, they typically don't have to reach into their pockets, Mr. DeBoer explained.


The 1031 provision of federal tax law applies to a wide range of assets--including cars, planes and patent rights. Real estate accounts for 36% of the exchanges, according to Ernst & Young LLP. In 2014, the Joint Committee on Taxation estimated that repealing like-kind exchanges would raise $40.6 billion in additional tax revenue over one decade.

Seems like another force that could cause the RE bubble to be pricked even further...

Trump's power broker (not Kushner -- the other one) resigns and sells stock one day after exposé reveals he's a massive slumlord (not Kushner -- the other one)

Tue, 06/13/2017 - 17:29
The story reported on how Barrack was able to wholesale being a scumbag landlord to 31,000 homes under his Colony Starwood Homes. The news began to get picked up and lo and behold, Mr. Barrack decided to cut and run.


Over the next seven days before Christmas [1994], Barrack and his lieutenant, Bill Rogers, would jet from New York to Los Angeles, Taiwan, London and Saudi Arabia, begging billionaires to buy the loans and keep the bankers from Trump's throat... Rogers says now, recounting the frenzied middle-of-the-night flights that kept the $4.5 billion West Side Railyards site from being Trump's burial ground.


That was back in 1994 when bankers wanted to be done with one of New York's worst businessmen, Donald Trump. Sadly, scumbags like Trump tend to get buoyed by other scumbags like Barrack. On Thursday, June 8, Reveal News published an exposé by Aaron Glanz that revealed how Thomas J. Barrack had created one of the largest scumlord rental schemes in the United States..

The Mall of the Future Will Have No Stores

Tue, 06/13/2017 - 13:06
Some landlords plug empty spaces with churches, for-profit schools and random enterprises while they figure out a long-term plan. Others see a future in mixed-use real estate, converting malls into streetscapes with restaurants, offices and housing. And some are razing properties altogether and turning them into entertainment or industrial parks.

Ford's 10-year lease at Fairlane Town Center [in Michigan] "brought 1,800 to 2,000 employed people to our property, people with a paycheck," said Mr. Powers. The mall, which is still anchored by Macy's , J.C. Penney and Sears, is currently 91% leased, he said, and its food operators are doing better in the daytime than they did before, as Ford workers pile in for lunch.

Ford liked the mall's proximity to its main facility in Dearborn, which is being rebuilt over the next 10 years, and its wide open spaces.


In all, retailers have announced 2,880 store closings from January to April 6 of this year, more than twice as many as in the same period a year earlier, according to Credit Suisse . For the full year, the investment bank anticipates more than 8,600 stores to close. Analysts predict that 400 or so of the roughly 1,100 malls in the U.S. will close in the coming years.

Many mall owners are trying to liven up the experience, bringing more dining and entertainment tenants and eschewing the traditional mix of middling food courts, fashion retailers and department stores.


One strategy is to convert enclosed malls into open-air properties that landlords call "lifestyle centers," with apartments, theaters, grocery stores, medical offices and other conveniences--and much less retail.

The Columbus Commons in downtown Columbus, Ohio, was previously home to a 1.25-million-square-foot mall. The park has spurred development around its perimeter, mostly office and residential.


In Arlington, Va., landlord Forest City Realty Trust is redeveloping Ballston Common Mall by knocking down the main entrance to create a plaza, removing two-thirds of the roof and installing more windows to create wider vistas of open spaces. The Cleveland-based real-estate investment trust is also building 406 apartments linked to the mall.

"We're turning the mall inside out," said Will Voegele, senior vice president at Forest City Realty Trust. "We don't want a building with its back turned to the street."

The firm is converting what was once Macy's furniture store on the third level of the mall into a gathering space for residents, including outdoor patios, seating and landscaping. Its tenant mix will feature more food options and street-facing retail.


[Columbus, Ohio] "surgically demolished" the [City Center Mall] over a two-year period to retain the underground parking structure, which was still used by workers downtown. In 2011, Columbus Downtown opened a park in its place called Columbus Commons, which has a performance space, two cafes, a carousel and bocce courts.

The park has spurred development around its perimeter, mostly office and residential, and hosts more than 200 events annually. The flagship Lazarus department store, which had been linked to the mall, is now an office building.

Taking some inspiration from parks and high-street retail in New York City, Mr. Worley said Columbus Downtown is looking to add restaurants and art galleries along the streets a block away from the park, preferring to keep the park-facing buildings for residential use.

While there have been no pure retail property projects around Columbus Commons, some retail stores are coming onboard that are "more organic, not national retailers," he added.

"Retail is coming back," he said, "but it's following residential."

Broadway's empty storefronts total almost 200, borough president says

Tue, 06/13/2017 - 08:35
Manhattan Borough President Gale Brewer announced Monday that her office tallied 188 vacant storefronts on the iconic thoroughfare, thanks to volunteers who helped survey storefronts along the avenue's entire span in Manhattan last month.


Retail experts cited several factors hindering the industry: people purchasing items online rather than in brick-and-mortar shops, demographic shifts that have flooded areas with newcomers who eschew former mainstays, and a rental market in flux.

"You're seeing the highest vacancy [rate] in Manhattan, at least, in history," said Scott Plasky, a retail specialist in Marcus & Millichap's Manhattan office. "They have opportunities to rent those spaces. There are tenants that want to be here: this is New York. But these guys either are unwilling or unable to lease at what the marketplace is telling them they're worth."

Plasky said some landlords are clinging to outdated expectations of how much rent they can collect because retail rents rose 90% in Manhattan between 2012 and 2014. They have since fallen nearly 21% as the retail industry continues to shut stores across the country, he said.

Record "Wealth" in America Comes With a Litany of "Funny" Companion Statistics

Mon, 06/12/2017 - 14:30
The Federal Reserve in the United States just released a new report showing that "Total Household Wealth" in the United States has reached a record $94.8 trillion... Even more impressive is that Total Household Wealth has increased by $40 trillion since the lows of the Great Recession in 2009. No doubt there's probably a multitude of central bankers and bureaucrats toasting their success in having engineered such magnificent prosperity.

... The thing is that the VAST majority of that wealth, especially the incredible growth over the last 8 years, has been from increases in just two asset classes: real estate and the stock market. In fact, stocks and real estate alone account for roughly 2/3 of the wealth increase since 2009.

... [and] according to the Federal Reserve, only 35% of [non-employee] small businesses are profitable. Most are operating at a loss. In other words, only 35% of the companies which make up 80% of American businesses are profitable. You're probably already doing the arithmetic-- this means that a whopping 72% of all US businesses are NOT profitable.

... [then] there's the little factoid that an astounding 40% of young Americans are living with their parents-- the highest percentage in the last 75 years.

And who can blame them considering student debt in the Land of the Free also hit a record $1.4 trillion three months ago, more than double the amount since the Great Recession.

Speaking of record debt, US credit card debt passed a record $1 trillion, and total US consumer credit hit a record $3.8 trillion last month.


Then there's the issue of wages, which have remained essentially flat since the 2009 Great Recession if you adjust for inflation.

According to the US Department of Labor, inflation-adjusted wages, aka "real hourly compensation" in the US fell an annualized 0.9% last quarter, and fell a dismal 5.6% in the previous quarter.