Friday, May 18, 2007

Dear Mr Market



Dear Mr Market,

I understand that you are busy and that you've a lot on your plate, but I was wondering what precisely you meant by the recent weakness in real estate (see above chart). Did you mean that the economy will will be softening and so future rent and capital value increases will necessarily be limited, OR did you mean growth and liquidity will continue unchecked and so inflation will be HIGHER and thus interest rates will rise hurting relative values, even for the bluest of bluechip portfolios such as BXP's(see below).

Your insights would be helpful for if real estate has stopped being an anti-dollar hedge, then surely some people should told.

(always) Respectfully Yours,

"Cassandra"

(P.S. - I do realize it's expiry friday and that it just might be fun & games for sport & profit, but confirmation would help)

7 comments:

Anonymous said...

How about rumbles in the CRE debt market? CMBX marches higher across all tranches. Rating agencies kikcking loans out of proposed securitizations. Talk of explicit credit tightening in the low doc, adjustable rate area. Which of, of course, leads to a likely reduction in the price of realized gains sold by the reit family, which, as everbody knows, has played it's fair share in their ramp. Rents really haven't gone up all that much.

Cheers,
RJ

"Cassandra" said...

What loose credit giveth, tighter credit can taketh away.....

Anonymous said...

Experience says residential dies first, partially because it comes in smaller pieces - but die commercial does.

That'll be that for the fourth attempt to finish the .

CB

Anonymous said...

Yes, the link works, but the text should read "Bay-Adelaide Centre". Whatever.

"Cassandra" said...

---thanks for that!! Toronto was indeed one of the greatest markets for carpetbaggers of all time in the early 90s....commerical buildings being, ontained as collateral by banks for sour loans kicked out at 35c on the CDollar of construction costs. That kind of opp doesn't happen too often. But the percevied wisdom seems to be that Central Banks will never again pull out the rug. Maybe THAT is always the perceived the wisdom at this point in the cycle. All I know is Bull Markets in real estate rarely start from sub-5% cap rates unless capital values have been only recently decimated (and still being decimated), London excepted of course....

Charles Butler said...

No accident Canary Wharf was hatched in TO. Who got rich from all that was the Ontario Teachers Pension Plan. They bought everything they could in '95. So rich, in fact, that two years ago they were dishing out cash payments to the subscribed to get rid of their surplus - and this a plan with a legal commitment to pay out 80% of the average last five years of a retiree's income, indexed to perpetuity at 2% below the CPI! Think $50K/year + indexing for folks generally retiring in their late 50's.

At one point, BTW, the stump was rigged up as one of those rope climbing walls.

Sorry about the link. Magically, Blogger cut it off in the middle after approving the preview... and then continued it on the next post(¿).

Anonymous said...

There is always the solution to change all the loans globally into jpy..