A Letter From The Inside
Here’s a letter from an established real estate investment firm in the city to its investors that landed in our inbox yesterday. It’s quite an interesting snapshot of where the various parts of the market stand, especially when it comes to financing. Of course, it was penned before yesterday’s failed vote. Although many of you…
Here’s a letter from an established real estate investment firm in the city to its investors that landed in our inbox yesterday. It’s quite an interesting snapshot of where the various parts of the market stand, especially when it comes to financing. Of course, it was penned before yesterday’s failed vote.
Although many of you may have experienced extreme difficulties and declines in your stock portfolios and the newspapers report daily on the dire problems with the housing market, our experience in the real estate rental business and the New York coop and condo market is not so extreme. Generally speaking our tenants continue to pay their rents and business continues in a more or less normal fashion. Although we are seeing more delinquencies than usual across our portfolio and we are carrying a greater number of residential vacancies than last year, it is fair to say so far the effects we have seen have been more consistent with a typical downturn in the economy and not more dramatic than that.
Given the current situation in the credit markets, we do anticipate having a more difficult time when seeking refinancing quotes, but we expect to be able to successfully resolve our various financing requirements. So far, our lenders have been negotiating normal mortgage extensions on appropriate market driven terms and at the moment, we do not foresee a problem in this area at least through the end of 2009…This is not to say we have not faced any problems with certain of our properties. We have found it difficult or impossible to arrange debt for new development and/or condominium conversion projects. The market is very reluctant to finance for-sale housing projects. As a result, we have put several new construction or conversion projects on hold and will continue to do so until the market returns to a more normal situation. In one case we even cancelled a deal and took a loss on our contract deposit rather than accepting inferior and expensive financing that would have strained our resources in an inappropriate manner.
Lechecal is correct about the way the Wall Street people live and spend. Remember, already starting a year or two ago there have been reports of those people losing or having to sell their 2nd and 3rd houses in the Hamptons because they’d bought what they could not afford.
Something that happened on every income level in this country, not just the people in fly-over territory, during the bubble was a feeling of inadequacy if you did not spend wildly on status items and properties. Even if you could not afford it. Thus the credit crunch and mortgage crisis.
http://supportedthebailout.com/
Intriguing.
Inigo:
A spectacular failure at insulting me. Douchebag must be the most trite insult used today.
“Unless we can find someone like Cramer who can convince voters that real action is needed, we won’t get a bill out of Congress until the Dow is at 8,000.” – NY Daily News ( http://tinyurl.com/3ngnow )
They are a sad group of people, suicidal sometimes. it happens quite a bit.
I don’t think it would make for a popular TV series. Too many people are in the same situation. It would not be entertainment. It would bomb.
But, people from rich families who overspend and act badly usually land on their feet, unless they are confronted with airport security and have a major meltdown. Middle-class life in America is resilient yet so fragile, no?
Let’s hope things will be easier for our kids, and yet the years go by so quickly, who can tell the difference between our childhoods and theirs? and the their children’s? Our intellects are on “fast forward” but human evolution and societal norms are on “slo-mo”.
lechacal – I think there’s a mini-series awaiting in the profiles of these folks you know. If you ever lose your job, you might want to pitch to HBO. What a sad group of people those big spenders must be.
polemecist, if you truly have all that experience in finance, then I apologise, you are not ignorant.
Instead you are probably just a douchebag. As a businessman who deals with a wide variety of professional, believe me, I truly appreciate the difference between the ignorant and the douchebaggy.
there are people in every income group who live at or beyond their means. its not just wall streeters. people w/ higher income brackets save more, especially when retirement savings are factored in.
Inigo:
“polemicist, stick to polemics and lay off economics, you know not what you write.”
I value commercial real estate for many of the most important organizations in this city. You’re talking to the wrong person.
“Buying distressed real estate is a way to make money not a way to lose money.”
That’s true if you have lots of cash, but that has absolutely nothing to do with the current crisis.
“This is why the bailout will not only work to calm down the securities markets and unfreeze credit but will also end up making money for the Treasury.”
I haven’t heard of anyone, with the exception of the cows in Congress and the grand bankster Paulson himself who believes that. Yours is the view of a naive MBA twit who believes economics is a shell game unrelated to resource scarcity and productive work. There is more going on here than Keynesian confidence.
“The current problem revolves around real estate or, to use econo-speak: “currently undervalued assets”. But real estate will come back. It always does, and the governemnt has the luxury of being able to wait.”
One need only to look at Japan to see you are quite wrong. The real crux of the matter is the government is desperate to prevent a deflationary scenario similar to the Depression or Japan.
The only solution to this problem is to massively inflate the currency with the hopes we can somehow maintain employment and that wages will increase with inflation. Then, and ONLY then, will the face value of these mortgages remotely approach market value of the underlying collateral.
However, the bailout will undoubtedly fail because the US cannot inflate the currency dramatically without seriously pissing off every country upon which we are dependent for goods, food, and energy.