CNBC: The Fed's Toxic Avenger

Trepp Sr. VP Tom Fink discusses what the Fed is doing to deal with the economy and head off a looming problem with commercial real estate, including Peter Cooper Village in NYC.

Worst Than a Drug Dealer

One of my favorite scenes from The Wire:

Winners in The GGP Bankruptcy

Mostly hedge funds, that bought GGP debt and equities at significantly distressed levels. According to FT:

Hedge funds and other investors now stand to make billions of dollars from their holdings in bankrupt US mall owner General Growth Properties, underscoring the extent of the recent rebound in financial markets, people familiar with the matter say.

Among the biggest potential winners is William Ackman’s Pershing Square Capital Management, which is sitting on a paper profit of more than $800m on investments in the debt and equity of GGP, according to people familiar with Mr Ackman’s fund. Other investors that stand to make big profits on holdings in the high-profile retail property owner include Centerbridge Partners, Elliott Associates, Goldman Sachs, John Paulson’s Paulson & Co and York Capital, the people said.

Harvey Green on CNBC

Weekend Roundup

U.S. Commercial Property Sales to Drop to $49 Billion ("Bloomberg")

A Potential Catalyst to Stimulate 2010 Property Sales Activity ("Street Wise")

Commercial Real Estate Will Collapse ("Forbes")

Zell: Predictions of commercial crash 'greatly exaggerated' ("Pension&Investments")

Slow Into Real Estate ("Forbes")

Developers Diversified deal ends CMBS drought ("Reuters")

BofA markets $460 mln Fortress CMBS without Fed aid ("Reuters")

Despite Slower Deal Volume, Commercial Banks Continue to Lend, Reis Reports ("NREI")

FDIC Seen Rejiggering Structured Offerings ("crenews.com")

FDIC Loan-Recovery Rate Falls to 29.6 Percent ("crenews.com")

Simon eyes General Growth’s mall portfolio ("FT")

General Growth Clinches Mortgage Pact ("WSJ")

Morgan Stanley Ends Costly Crescent Phase ("WSJ")

Foreclosure Spat Brews in Chicago ("WSJ")

Is 2011 Too Soon For Multifamily Prices To Hit Rock Bottom? ("Multi-family Investor")

Marriott/Ritz Reorganization Is Smart Move ("Front Desk")

Investors Bullish on Health Care Real Estate as Reform Showdown Draws Closer ("CoStar")

Meredith Whitney on CNBC

Some refreshing comments from Meredith Whitney.

Bernanke on Commercial Real Estate

From FRB:

While I am on the topic of bank lending, I would like to add a few words about commercial real estate (CRE). Demand for commercial property has dropped as the economy has weakened, leading to significant declines in property values, increased vacancy rates, and falling rents. These poor fundamentals have caused a sharp deterioration in the credit quality of CRE loans on banks' books and of the loans that back commercial mortgage-backed securities (CMBS). Pressures may be particularly acute at smaller regional and community banks that entered the crisis with high concentrations of CRE loans. In response, banks have been reducing their exposure to these loans quite rapidly in recent months. Meanwhile, the market for securitizations backed by these loans remains all but closed. With nearly $500 billion of CRE loans scheduled to mature annually over the next few years, the performance of this sector depends critically on the ability of borrowers to refinance many of those loans. Especially if CMBS financing remains unavailable, banks will face the tough decision of whether to roll over maturing debt or to foreclose.

Recognizing the importance of this sector for the economic recovery, the Federal Reserve has extended the TALF programs for existing CMBS through March 2010 and newly structured CMBS through June. Moreover, the banking agencies recently encouraged banks to work with their creditworthy borrowers to restructure troubled CRE loans in a prudent manner, and reminded examiners that--absent other adverse factors--a loan should not be classified as impaired based solely on a decline in collateral value.

Randall Zisler: Commercial Property Prices May Fall 20% More

Randall Zisler is CEO of Zisler Capital Partners LLC.

William Mack: Commercial Real Estate: An Orderly Massacre?

A Morgan Stanley Real Estate Star Falls in China

Reuters has an excellent piece on the fall of Garth Peterson, the former Managing Director at Morgan Stanley Real Estate in China, who was fired last December due to suspicions that he had violated the U.S. Foreign Corrupt Practices Act:

In the end, Garth Peterson, a rising star at Morgan Stanley in China, was undone by his pursuit of "guanxi."

A central concept in Chinese society, guanxi loosely translates as "connections" and relationships." But to Chinese people, it means much more than that: Guanxi equals power.

"Sometimes, money cannot buy you guanxi. But if you have guanxi, you will definitely have money," according to a Chinese saying.

When Peterson, an American then in his early 30s, joined Morgan Stanley's (MS.N) real estate investment operation in China about eight years ago, he had not yet accumulated much guanxi. But he would soon possess a surplus, fueling his rapid ascent at the bank.

Go read the whole thing.

Making Verbal Threats to Politicians is Not The Way to Go

Folks at The Saint Consulting Group will appreciate this story. Dan Lee, now-former chief executive of Las Vegas based casino operator Pinnacle Entertainment Inc resigned abruptly on Monday. Once regarded as a visionary on Wall Street, Mr Lee is being investigated for alleged verbal threats against a local politician in St. Louis, Missouri:

Pinnacle’s official line Monday was that Lee resigned to “pursue other business interests.” Nonetheless, most industry experts say a flap last week with St. Louis City Council Member Steve Stenger forced Mr. Lee’s exit. Mr. Lee was highly regarded as a visionary on Wall Street and his departure is seen as a loss for the company even though Pinnacle’s stock closed up 4.1% to $9.08 amid a broad market rally.

Mr. Lee is accused of making verbal threats to Mr. Stenger after he voted to approve a zoning law that would potentially allow another casino development to compete with Pinnacle in the St. Louis market, confirmed LeAnn McCarthy, a spokeswoman for the Missouri Gaming Commission. She said the investigation will continue despite Lee’s resignation.

Dan Lee himself admitted he “made the worst move in his political career.”

Top 25 Most Valuable Blogs

24/7 Wall Street just published its annual edition of the top twenty-five most valuable blogs in America. The usual suspects are all on the list, Gawker, Huffington Post, Perez Hilton, Drudge Report and TechCrunch. Three business blogs made the list:

11. Seeking Alpha. Worth $16 million.
16. The Business Insider. Worth $7 million.
25. 24/7 Wall St..

AMB's Moghadam Sees Industrial Property Demand Rising

Fed Funds Unchanged at 0-0.25%

From FRB:

Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

CNBC: Wilbur Ross on Commercial Real Estate

Billionaire Wilbur Ross made some news the other day with his views on commercial real estate. This morning, he clarified his views on CNBC. I'm not sure if I agree 100% with his equating reckless lending in commercial real estate with subprime lending in the housing market though. His comments starts at around 4:26 minute mark.

Real Estate May Stay in This Suspended State For a While

FDIC Wants Banks to Modify CRE Loans

From FDIC:

The regulators have found that prudent CRE loan workouts are often in the best interest of the financial institution and the borrower. Examiners are expected to take a balanced
approach in assessing the adequacy of an institution’s risk management practices for loan workout activity. Financial institutions that implement prudent CRE loan workout arrangements after performing a comprehensive review of a borrower’s financial condition will not be subject to criticism for engaging in these efforts even if the restructured loans have weaknesses that result in adverse credit classification. In addition, renewed or restructured loans to borrowers who have the ability to repay their debts according to reasonable modified terms will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance.