Implode Explode

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Tracking the many faces of the global credit implosion.
Updated: 11 min 17 sec ago

U.S. pending home sales surge to ten-month high ahead of spring

Wed, 03/29/2017 - 15:31
``Contract signing last month was likely boosted by unseasonably warm temperatures. The gains reversed January's 2.8 percent drop. Pending home contracts become sales after a month or two, and last month's surge implied a pickup in home resales after they tumbled 3.7 percent in February. ''

Manhattan Landlords Are Offering Massive Giveaways to Lure Retail Clients (IN LIEU OF MUCH-NEEDED PRICE CUTS)

Tue, 03/28/2017 - 12:50
Tenant-improvement allowances haven't been typical in the Manhattan retail market. But now the concessions, which can pay for anything from lighting and displays to a complete overhaul, are becoming a key component in some new leases, particularly for large, flagship stores in high-profile areas, such as Madison Avenue and Fifth Avenue, according to Steve Soutendijk, an executive director at brokerage Cushman & Wakefield Inc. 

"We're seeing tenant-improvement and concession packages that retail landlords never, ever contemplated before," he said.


The details of leases in Manhattan are often closely guarded secrets, making it difficult to quantify the incentives retailers are receiving. Landlords have a lot of ways to cut a deal without lowering asking rents, such as paying the construction contractor, offering an extended period of free rent or simply writing a check for the tenant to use at their discretion.

... Tepid demand for luxury goods and a stronger U.S. dollar that's crimped spending by tourists have particularly hurt Fifth Avenue, where the space-availability rate was at a record 15.9 percent in fourth quarter, up from 10.1 percent a year earlier, Cushman data show. The average rent on the stretch from 49th to 60th streets reached a record $3,213 a square foot in the third quarter before dropping in the last three months of the year to $2,985.

Condo Flippers in Miami-Dade Left Twisting in the Wind

Sun, 03/26/2017 - 10:07
Miami-Dade's spectacular condo flipping mania is in turmoil, with sales plunging, inventory-for-sale soaring, and new supply flooding the market... In February, existing home sales of all types fell 10% year-over-year, to 1,835 homes. These sales "do not include Miami's multi-billion dollar new construction condo market," the Miami Association of Realtors clarified in its report on March 23.


[The current high] inventory [which is 2x the level in 2013] understates the total number of condos for sale. It only includes units listed for sale on the Multiple Listing Service (MLS). But developers normally don't list their new units on the MLS, and thus they're not included in the above chart.

Death of the American Dream? Life In Post-Crisis America

Sat, 03/25/2017 - 09:10
``As you can see, after a steady 40-year build, owner-occupied housing has stagnated and sits at the lowest level since 2004. This has sent the homeownership rate crashing to 63.4 percent, the lowest since 1967. It would be nice to think that things were looking up for would-be homeowners. But it's difficult to be overly optimistic when the local newspaper reports that house flipping in the Dallas-Ft. Worth area rose 21 percent in 2016, seven times the national rate.''

Why the Retail Apocalypse Has Only Just Begun...

Sat, 03/25/2017 - 09:03
``Department stores are down big. And yet, mall stocks are still treading water.''

Renters Now Rule Over Half of U.S. Cities

Thu, 03/23/2017 - 14:53
``Fifty-two of the 100 largest U.S. cities were majority-renter in 2015, according to U.S. Census Bureau data compiled for Bloomberg by real estate brokerage Redfin. Twenty-one of those cities have shifted to renter-domination since 2009. These include such hot housing markets as Denver and San Diego and lukewarm locales, such as Detroit and Baltimore, better known for vacant homes than residential development. ''

Landmark Times Square Building Forecloses, As Latecomer Owners "Waste Away In Margaritavile" of RE Downturn

Thu, 03/23/2017 - 09:26
A unit of Brookfield Asset Management foreclosed on a $60 million mezzanine loan after owners of the former music industry mecca [The Brill Building] failed to make a $5.6 million payment in November.

The owners -- including Allied Partners, Brickman & Associates, Israeli pension fund Halman-Aldubi and New York's Conway Capital -- got steamrolled by the weak retail leasing market. They'd hoped to cash in, or out, on the 180,000-square-foot landmark's 40,000 square feet of store space. But a possible deal with Jimmy Buffett's theme restaurant, Margaritaville, fell through.''

The below (courtesy of B.D.) is an excerpt of a July 2016 article, from when the new owners bought a $295 million stake in the building (it's not clear how large a share that represents). Regardless, this all sure looks "peaky" to us...

Brill Holdings, a partnership of real estate investment firm B+B Capital, Israel-based fashion chain Fox-Wizel and landlords Conway Capital and Schottenstein Realty, has bought into the landmarked Brill Building for $295 million, Commercial Observer has learned.

CO reported in August 2015 that the 175,000-square-foot building at 1619 Broadway between West 49th and West 50th Streets was in contract and as of today, Allied Partners and Brickman are co-owners of the 11-story building with Brill Holdings.

Existing home sales fall from 10-year high

Wed, 03/22/2017 - 08:58
January's sales pace was unrevised at 5.69 million units, which was the highest level since February 2007. Economists polled by Reuters had forecast sales decreasing 2.0 percent to a pace of 5.57 million units last month.

"Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that's pushing up price growth and pressuring the budgets of prospective buyers," said Lawrence Yun, the NAR's chief economist.

I attended the top of the Canadian Housing Market, so you didn't have

Tue, 03/21/2017 - 09:13
The second important factor in real estate is financing.  Not everyone has money, so what can they do?  The answers were shocking.  Be ‘creative' was the first response.  Pool your money, borrow from friends and family, own just 5% of a house, get the money however you can and just do it - remember, it only goes up.  Other financing suggestions were get cozy with a lender and they will ‘bend the rules' for you!  The fact that the biggest condo developer in Canada (Brad Lamb) said lenders will bend (but not break, apparently) rules to get you financing in front of 15k people with most people smiling and nodding was shocking.  


Plenty of "high double-digit monthly yields", retire early with real estate, "everyone needs a place to live - buy apartments" type messages. Almost all of these pitches were second lien lending. Most offered yields in the 8 to 10% range. The presentations all suggested that you can borrow money, if you don't have it, at 4% and then buy these investments at 10% - easy money.


The Paramount Equity pitch was also interesting and stated in all caps "HIGH DOUBLE-DIGIT RETURNS ON YOUR CASH, RRSP". This product pays monthly, is a second lien mortgage, with a one year term and LTV <85%. Paramount uses clever language that states they cover the cost of defaults. By that they mean they pay some of the fees, not the default risk itself.

Chinese Home Prices Heat Up Again, As Government Gets Cold Feet

Mon, 03/20/2017 - 18:12
On month-over-month basis, house price growth diverged among different city tiers. Home price inflation decelerated in tier-1 cities, but home price inflation in tier 2/3/4 cities was steady or accelerated, which goes back to the core issue discussed last Friday: for all the talk about moderating home prices, China is first and foremost focused on preserving the wealth effect, which a sharp drop in home prices would crush.


In short, China evaluted the risk of a potential housing bubble burst, and deciding that - at least for the time being - it is not worth the threat of losing a third of Chinese GDP in "wealth effect", got cold feet.

Central Bank Shell Game: What Sweden's Negative Interest Rates Do to Consumers

Mon, 03/20/2017 - 18:07
the "Swedish Model" is under attack. The egalitarian underpinnings, unwinding with the negative rates, are driving a wedge into Swedish society, creating extremes on both sides of the economic spectrum. The rampant consumerism, encouraged by artificially low rates, continues to widen the wealth gap. Coincidentally, the middle class deteriorated the most between 2014 and 2015: the same time that deposit rates took a dive. Furthermore, the negative savings rates are driving the average person to "gamble" on speculative investments instead of saving and building a future over the long term.


Recently, inflation has been heating up. Near zero from 2013 to 2015, it edged up to almost 1% in 2016, and printed 1.8% in February. Much of it is supply driven: rising import prices attributed to a falling SEK. The real interest rates fell to negative -2.3% (Repo Rate minus Inflation) last month. At some point, Riksbank will either have to raise rates or the government will have to intervene to avert a currency crisis.


It is clear that the negative rate experiment is neither sustainable nor helpful to economic growth. It only inflates bubbles while widening the wealth gap in Swedish society. A once prudent and financially conservative people are now getting drunk on debt, wrecking their future. The very premise of Swedish society is under attack. Nevertheless, it does not appear that this policy will abate anytime soon.

Ackman's "Surefire Bet" Turns Into a $4 bln Loss... While Facing $2 bln Insider-Trading Suit

Mon, 03/20/2017 - 08:29
Hailed as a master investor, he clinched his highflier status in the fall of 2014 by paying $90 million with some friends to buy the penthouse at One57, a 13,500-square-foot aerie in Midtown Manhattan overlooking Central Park. He didn't plan to live there -- it was an investment property -- but until he sold it, the apartment would make a good party space, he told The New York Times. If Mr. Ackman were a stock, that might have been his peak.

Today, things are very different for him. His company's performance is way down, he is in the midst of an expensive divorce, and on March 13, he and investors in funds run by Pershing Square Capital Management swallowed a $4 billion loss on Valeant Pharmaceuticals International, a beleaguered drug company.


while his funds notched an exceptional 40 percent gain in 2014 -- much of it attributable to the Allergan trade that has drawn the lawsuit -- Mr. Ackman's funds lost 13.5 percent last year and 20.5 percent in 2015. Through March 15, Pershing Square is flat.


One reason so many on Wall Street have been riveted by Mr. Ackman's wrong-way Valeant bet is that it seems to confirm an age-old investing truth: Karma has everyone's address. For example, Mr. Ackman's $4 billion loss in Valeant more than wiped out the $2.2 billion he made in 2014 on Allergan.


As [the Valeant] calamity played out, Mr. Ackman was also fighting the Allergan lawsuit in California. The plaintiffs were investors who had missed out on gains in Allergan stock in 2014 because they had sold shares without knowing about Valeant's impending bid, while Pershing Square, which did know about it, was buying Allergan shares. They contended that Valeant and Pershing Square violated securities laws, which prohibit fraudulent, deceptive or manipulative actions in connection with a tender offer.

World Out Of Whack: What's Next For Global Real Estate?

Sat, 03/18/2017 - 17:53
``When rates continuously moved lower and then lower still as coordinated global central banks held rates down, buying in anticipation of ever cheaper financing costs made a lot of sense. Plenty people have gotten very rich doing it over the last few years. [But] Even just a 25bp move on debt financing on a multimillion portfolio of assets translates into a a heck of a lot on the asset price revaluation.''

NYC, SF Apartment Rents Need to Drop as Much as 15%, LeFrak Says

Wed, 03/15/2017 - 08:44
"We built a lot of new product at the high end, anticipating incomes that don't exist in the market now," LeFrak, chairman and chief executive officer of the LeFrak Organization, said Wednesday in a Bloomberg Television interview. "We need more affordable product in the market. There's a huge demand at that price point."


New York landlords are already feeling the pinch as renters take advantage of a flood of new buildings to negotiate concessions and price cuts. Rents fell last month for Manhattan apartments of all sizes, the first across-the-board decline in at least four years, as property owners compromised to keep units from going empty.

We're sure Trump's rollback of permitting regulations will put a stop to this slide!

Home builder confidence soared to highest level in 12 years as Trump rolls back regulations

Wed, 03/15/2017 - 08:42
Builder sentiment had moved higher just after the election, but then receded at the start of the year amid rising mortgage rates and a continued labor shortage. Trump signed an executive order at the end of February designed to roll back a 2015 rule from the Obama administration known as the Waters of the United States. Home builders have called the rule "burdensome" and claim that 25 percent of the cost of a home today is due to regulation, including this one.

Builders are not only pleased with Trump's first move on water, they also expect further deregulation to bring down construction costs. There are, however, other roadblocks keeping the nation's builders from producing more homes, which are sorely needed in today's tight housing market.

"While builders are clearly confident, we expect some moderation in the index moving forward," said NAHB Chief Economist Robert Dietz. "Builders continue to face a number of challenges, including rising material prices, higher mortgage rates, and shortages of lots and labor."

Report: Trump's 2005 Taxes Revealed

Wed, 03/15/2017 - 08:02
 The documents show Trump and his wife Melania paying $5.3 million in regular federal income tax--a rate of less than 4 percent. However, the Trumps paid an additional $31 million under the alternative minimum tax, or AMT. Trump has previously called for the elimination of this tax.


Trump's 2005 return also shows that he'd continued to benefit from the roughly $916 million loss he reported in his 1995 return--published last year by The New York Times. Using a loophole Congress closed in 1996, Trump converted that loss into a tax credit for the same amount he could offset against income.

2005 was the year that Trump, a newly minted reality-TV star, made his last big score as a real-life real-estate developer, when he sold two properties, one on Manhattan's West Side and one in San Francisco, to Hong Kong investors, accounting for the lion's share of his income that year.

Why the Real Estate Market Is Imploding Again...

Tue, 03/14/2017 - 08:59
I'm not talking about the housing market. I'm talking about retail real estate... 334 malls are "at high risk of closing." That's about a third of the nation's malls.

... The world's biggest REIT is in trouble. Today's chart shows the performance of Simon Property Group (SPG). Simon owns or has an ownership interest in 190 million square feet of mall floor space. You can see its stock has plunged 26% since August. It's now trading at its lowest level since October 2014.

Kushners Set to Get $400 Million From Chinese Firm on Tower (NO BUYING OF INFLUENCE HERE...)

Mon, 03/13/2017 - 12:22
A company owned by the family of Jared Kushner, President Donald Trump's son-in-law and senior adviser, stands to receive more than $400 million from a prominent Chinese company that is investing in the Kushners' marquee Manhattan office tower at 666 Fifth Ave.


The proposed partnership is seeking additional participants through a controversial federal program known as EB-5, which is intended for economically distressed neighborhoods and provides residency permits to major foreign investors.

The deal would value the 41-story tower at $2.85 billion, the most ever for a single Manhattan building: $1.6 billion for the office section and $1.25 billion for the retail section. The new partnership will refinance $1.15 billion in existing mortgage debt.


"At the very least, this raises serious questions about the appearance of a conflict that arises from the possibility that the Kushners are getting a sweetheart deal," said Larry Noble, general counsel at the Campaign Legal Center. "A classic way you influence people is by financially helping their family."


The deal would allow Vornado Realty Trust -- which is partnered with Trump in his two most valuable properties -- to exit a troubled asset with a 10-fold payout on its stake in the building's offices and a doubling of its investment in its stores. It declined to discuss the deal.


Anbang would pay a hefty price for both sections of the 666 Fifth Ave. project but score its first U.S. real estate investment of the year. The company's ties to the Chinese government are sufficiently unclear that former President Barack Obama declined to stay at the Waldorf after Anbang bought it because of fears of espionage. Now Anbang will be business partners with in-laws of the First Family.


Supporters argue that the program, which is overwhelmingly used on deals involving Chinese investors, attracts foreign capital and creates jobs at no U.S. taxpayer cost. But some Homeland Security officials and the General Accounting Office have warned that lax vetting has threatened to turn the program into a mechanism for the government to sell visas to wealthy foreigners with no proven skills, paving the way for money laundering and compromising national security.

It has been used to finance high-profile developments in wealthy enclaves, however, including Brooklyn's Barclays Center and Hudson Yards. The deal for 666 Fifth Avenue, on one of the world's most expensive shopping strips, blocks from Trump Tower, would arguably be the toniest location for an EB-5 project yet. The $850 million in EB-5 funding sought in the refinancing plan for 666 Fifth Avenue would be the largest to date.

Trump promised $1 trillion for infrastructure, but the estimated need is $4.5 trillion (PROS SAY TAX HIKE REQUIRED)

Fri, 03/10/2017 - 09:36
The Trump administration promises to pump $1 trillion into improving the country's crumbling infrastructure, but a benchmark report says it will take almost $4.6 trillion over the next eight years to bring all those systems up to an acceptable standard.

The price tag for redemption has grown steadily for 15 years while an expanding country has focused on building new infrastructure rather than maintaining existing systems that were nearing the end of their natural life.

Since 2001, the cost of repairing those systems has mushroomed from $1.3 trillion to the current figure, more than three times as high, according to an assessment released Thursday by the American Society of Civil Engineers (ASCE). The report comes out every four years.

It gave the U.S. infrastructure an overall grade of D-plus, the same grade it received in 2013, "suggesting only incremental progress was made over the last four years."

"President Trump is on to something when he calls for a national rebuilding," ASCE President Norma Jean Mattei said in presenting the study. "But Congress and the American people have to pay for it."

She said lawmakers should raise the federal gas tax by 25 cents and index it to inflation.

One in Three U.K. Homeowners Gets More Wealthy From Property Than Work

Fri, 03/10/2017 - 09:29
``While homeowners would have to sell their houses to realize those gains, it illustrates how quickly prices have risen, as well as how hard it is for new buyers to get on the property ladder.''