The prob
lem is about to get very, very big: Between now and 2011, as much as $814 billion in commercial real estate loans will mature - and need to be refinanced. The problem is that the credit markets are still too tight for most commercial projects.
Most banks have tightened their lending standards, reduced the amount they are willing to lend and significantly reduced the value of the collateral (malls). This leaves many owners with little choice but to turn to the Fed.
Back in May - and with much fanfare - the Federal government announced it would soon be expanding its Term Asset-Backed Securities Loan Facility (TALF). It now plans to include existing securities backed by loans for apartment buildings, office complexes, shopping centers and other commercial property.
But these programs aren’t an industry panacea. If you read the fine print, they provide backing only if the securities are rated AAA by major rating agencies. This excludes just about all the needy real estate - and the REITs that own it - from participating in the program.
How to Play the Commercial Real Estate Fallout
So, how do we play the commercial real estate fallout? The bottom-line is this: Many shopping malls in this country are simply going to disappear. Supply and demand will ultimately determine how many. All this bodes well for really big operators like Kimco Realty (NYSE: KIM) and Simon Property Group (NYSE: SPG), long-term plays that are large enough to weather the lengthy storm.
But for short-term investors looking to pick up some companies on the bottom, beware of going long just yet: While the market has already baked in a lot of bad news, uncertainties surrounding any additional big chain bankruptcies persist.
That means many REITs still have further to fall.
If you’re looking for an investment option that plays this angle, a dropping real estate market bodes well for ProShares UltraShort Real Estate (NYSE: SRS). It seeks investment results equal to twice the inverse of the daily performance of the Dow Jones U.S. Real Estate Index.
In the coming weeks, I’ll take a look at the office and industrial property side of commercial real estate that, unfortunately, isn’t much better off than the malls.
For further details visit as : seekingalpha.com/article/143928-how-to-profit-from-the-commercial-real-estate-fallout
lem is about to get very, very big: Between now and 2011, as much as $814 billion in commercial real estate loans will mature - and need to be refinanced. The problem is that the credit markets are still too tight for most commercial projects.Most banks have tightened their lending standards, reduced the amount they are willing to lend and significantly reduced the value of the collateral (malls). This leaves many owners with little choice but to turn to the Fed.
Back in May - and with much fanfare - the Federal government announced it would soon be expanding its Term Asset-Backed Securities Loan Facility (TALF). It now plans to include existing securities backed by loans for apartment buildings, office complexes, shopping centers and other commercial property.
But these programs aren’t an industry panacea. If you read the fine print, they provide backing only if the securities are rated AAA by major rating agencies. This excludes just about all the needy real estate - and the REITs that own it - from participating in the program.
How to Play the Commercial Real Estate Fallout
So, how do we play the commercial real estate fallout? The bottom-line is this: Many shopping malls in this country are simply going to disappear. Supply and demand will ultimately determine how many. All this bodes well for really big operators like Kimco Realty (NYSE: KIM) and Simon Property Group (NYSE: SPG), long-term plays that are large enough to weather the lengthy storm.
But for short-term investors looking to pick up some companies on the bottom, beware of going long just yet: While the market has already baked in a lot of bad news, uncertainties surrounding any additional big chain bankruptcies persist.
That means many REITs still have further to fall.
If you’re looking for an investment option that plays this angle, a dropping real estate market bodes well for ProShares UltraShort Real Estate (NYSE: SRS). It seeks investment results equal to twice the inverse of the daily performance of the Dow Jones U.S. Real Estate Index.
In the coming weeks, I’ll take a look at the office and industrial property side of commercial real estate that, unfortunately, isn’t much better off than the malls.
For further details visit as : seekingalpha.com/article/143928-how-to-profit-from-the-commercial-real-estate-fallout
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