johnthebear

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  • Mortgage Resets: Subprime May Be Ending, Option ARMs Have Just Begun
    Is there any way out of the messsssss?

    I wonder about a law that freezes interest rates on all adjustable rate mortgages for 5 years. That would stop the foreclosure part of the problem while the economy heals damage already done.

    The banks and other lenders would be hurt, but when they resort to such below the belt tactics, who better should feel the pain?
    Apr 18 13:52 pm |Rating: 0 0 |Link to Comment |View article
  • Housing Market Tracker - Subprime In Large and Small Banks
    Dear Judy: I asked about how should office buildings, shopping centers etc. that make up the REITs portfolio must be handled under the GAAP accounting rules. When interest rates rise (comparable to junk bond yields) they form a component of the capitalization rate. The net operating income may not have changed (yet) due to rising vacancy rate and slowing of the growth of lease rates, but the higher cap rates divided into the income mean that property values decline. The best property may have a cap rate of 5% prior, but now might only get a 8% cap rate. This means say that 1000/.05 = 20,000 property value vs 1,000/.08= 12,500 property value, which means a 37.5% drop in property value. So when you mark to market with the higher cap rate, there is huge discount.

    So, I am wondering what the rules are that apply to REITs? How often are properties appraised? Will this apply to the first quarter earnings report later this month. Also, will they also be required to mark down all the CMBS they hold to market and if so, how will this be done?

    So, I would appreciate your help. Thanks

    John
    Apr 10 21:25 pm |Rating: 0 0 |Link to Comment |View article
  • Housing Market Tracker - Subprime In Large and Small Banks
    You asked for comments... please help me understand how mark-to-market will affect the REITs in the IYR index?

    Thanks
    Apr 08 21:23 pm |Rating: 0 0 |Link to Comment |View article
  • Wall Street Breakfast: Must-Know News
    The Wall Street Journal reported that General Growth Properties and Simon Property Group are planning to sell shares to raise cash, which would dilute current share holders value. This is comparable to a recent experience in England. The press reported that cap rates in England were lower than mortgage rates and the REIT was forced to sell shares to raise cash for redemption's.

    In looking at the balance sheet of Simon Properties, the long term debt was reported to be $19 billion in real estate which was financed with $17 billion in long term debt. I question the terms of the long term debt. It has been reported that 59% of the mortgage debt for commercial properties was interest only! Further raising doubt is the report by Mood's that the loan to value ratio was typically 110% or more.

    So, the reason for the sale of shares may be that the interest only loans at substantially interest rates have caused a problem for Simon.
    Mar 26 00:41 am |Rating: 0 0 |Link to Comment |View article

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