TARP Watchdog Says Commercial Real Estate Loans Pose Danger - Bloomberg

Feb. 11 (Bloomberg) -- Commercial real estate loans have the potential to go sour and wreck the U.S. economy unless regulators prepare now, according to a report today from a watchdog Congress created for the government’s financial bailout program.

The report should be a “red flag” that prompts regulators to increase preparations for staving off another banking crisis, said Elizabeth Warren, a Harvard law professor and chairman of the Congressional Oversight Panel of the Troubled Asset Relief Program. The panel was created in October 2008 to monitor the Treasury’s efforts to rescue the banking system from the worst financial crisis in decades.

Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms and nearly half are “underwater,” meaning the borrower owes more than the property is worth, the report said. If economic conditions and tighter lending standards mean that borrowers can’t refinance, “hundreds” of banks could fail and the broader economy could suffer, said the report, which the panel approved unanimously.

“There is a serious problem coming and it will hit an already weakened financial system,” Warren said on a conference call yesterday with reporters.

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Banks face up to $300 billion in commercial loan failures, threatening 100s of banks

Bailout watchdog: Billions in commercial real estate losses could threaten banks and economy

WASHINGTON February 11, 2010 (AP)

The Associated Press

Over the next several years, failed commercial real estate loans could litter American cities with empty stores and office complexes, cause hundreds of bank failures and weaken the economy, a watchdog report says.

Banks face up to $300 billion in losses on loans made for commercial property and development, according to a report released Thursday by the Congressional Oversight Panel. The panel monitors the government's efforts to stabilize the financial system

The report says the defaults could lead to reduced lending and cause the eviction of families from rental properties. Bank failures also could contribute to job losses and hurt the economic recovery.

Smaller banks are more vulnerable to the losses than their larger Wall Street counterparts. That's because commercial real estate makes up a larger portion of their portfolio.

The Federal Deposit Insurance Corp., which manages bank failures and insures deposits, is under stress that will intensify over the next few years, panel chairwoman Elizabeth Warren said in a call with reporters. READ MORE

Bloomberg.com | Insurers Face $23 Billion Loss on Commercial Property

Nov. 17 (Bloomberg) -- U.S. life insurers, a group led by MetLife Inc. and Prudential Financial Inc., may lose as much as $22.6 billion on investments in commercial real estate through 2011, Fitch Ratings said.

Losses on investments in apartment buildings, offices, shopping malls and other commercial real estate will begin to increase in the next 6 months to a year as rents decline and vacancies increase, said Fitch Senior Director Andrew Davidson. Life insurer losses on commercial real estate have been “virtually nil” so far, he said.

“It will be more of a 2010 and 2011 issue,” Davidson said in an interview today. “It will put some stress on the capital positions as they realize the losses.”

Life insurers held more than $450 billion in commercial loans and mortgage-backed securities at the end of 2008, Fitch said in a related report. The delinquency rate on U.S. CMBS rose to 4.01 percent at the end of October, almost seven times what it was a year ago, Moody’s Investors Service said yesterday.

MetLife has recorded three straight quarterly losses and Hartford Financial Services Group Inc. has lost money since June 2008 as investments that include those backed by commercial and residential mortgages dropped in value. New York-based MetLife and Prudential have said commercial mortgage defaults will climb in the next year.

‘Worst to Come’

“Losses in our commercial mortgage portfolio are going to accelerate over the next 18 months,” Bernard Winograd, executive vice president of Newark, New Jersey-based Prudential, said in an August conference call. “The fact that there have been very little in the way of delinquencies so far should not be taken as an indication that there won’t be losses.” FULL STORY>>>>

Convenience stores expect growth - Commercial real estate market said to enable better deals for new locations

http://www.lvbusinesspress.com/articles/2009/10/19/news/iq_31803075.txt

Las Vegas Business Press - Monday, October 19, 2009 - While other retailers are scrapping growth plans, the $624 billion convenience-store industry is getting even more aggressive in pursuit of new markets.....

Bloomberg.com | Commercial Real Estate Debt Jumps Amid Soaring Delinquencies

Oct. 19 (Bloomberg) -- Yields on bonds backed by hotel, shopping-center and skyscraper loans narrowed relative to benchmarks as U.S. programs help drive demand even as late payments soar on the underlying commercial real estate debt, according to Barclays Capital.....

Reuters | Stay away from banks bearing commercial property-Goldman Sachs

NEW YORK, Sept 30 (Reuters) - Goldman Sachs on Tuesday advised investors to shy away from banks and insurance companies that are heavily focused on commercial real estate, saying that the downturn in commercial real estate was more severe than Goldman had expected.

"Prices have yet to stabilize and thus are likely to overshoot our original estimates further," Goldman analysts said in a report.

Appraisal values have fallen 25 percent. Goldman expects a decline from peak levels in 2007 of 40 percent to 42 percent, a much steeper declined than the 28 percent it expected.

Sales prices have plunged 39 percent from their peak prices verses Goldman's prior estimate 24 percent.

At the same time, vacancy rates have risen 35 percent versus the 17 percent Goldman had expected. Rents have fallen by 9 percent, translating into fundamentals that have deteriorated by more than twice the rate Goldman anticipated.

Goldman expects $287 billion of losses on commercial real estate and construction loans.

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