Dear Professor Zucchi I know this is probably a redundant question but when do you think reality will realign itself and the Proshares Ultrashort Real Estate (SRS) show some upward spunk?I read your article Commercial Real Estate Comeback: Comfort for the Bears and wondered if it's difficult to wait out the commercial real estate euphoria that keeps pushing the index higher. Minyan Tim Dear Minyan Tim Unfortunately I have very little to add about what’s happening to Commercial Real Estate (CRE). In the last couple of months I laid out in fair details the fundamental and structural reasons why ...

As Commercial Real Estate (CRE) bears suffer through the ongoing disconnect between delusion (stock prices) and reality (CRE fundies are imploding) here are a couple of charts that may give Boo some comfort. First you can see the 5-year credit default swaps (CDSs) of 3 of the highest quality REITs: Vornado (VNO) Boston Properties (BXP) and Simon Property Group (SPG). Click to enlargeAs you can tell the 60-80% rally the stocks have enjoyed has coincided with a similar shrinkage in the CDS spreads. What should give Hoofy some pause is that during the 20% or so retracement of the last week ...

Commercial mortgage delinquencies rose to an 11-year high in April as credit conditions made it difficult for landlords to refinance loans. A Bloomberg story citing property research firm Trepp LLC reports the percentage of loans that are delinquent by 30 days or more rose to 2.45% - nearly double the rate 5 years ago and the highest since the firm began keeping records in 1998. From October of 2005 through November of 2008 the delinquency rate remained just under 1%. But recently apartment delinquencies began to surge. After rising to 3.84% in March they jumped to 5.24% in April. ...

I promised a follow-up on A Commercial Real Estate Comeback so here it is. Given that I’ve already spelled out my thinking on the sector I’ll use a “bullets” format here pulling in ideas from recent reports by Goldman Sachs (GS) and Stifel Nicolaus as well as information from a very well-placed broker in the Washington area: 1. In prime office markets closings for trophy properties are being done at 7.5-8.5 cap rates; anything other than “trophy” quality is above 9.0 caps. Against a backdrop of halcyon-era deals which happened at nominal 3-4 caps (in reality cap rates were at zero ...

With the IShares DJ US Real Estate (IYR) up 50% from the March 6 lows I'm not the only bear on commercial real estate (CRE) wondering whether this sector has seen its worst days and is ready for a comeback. To try to answer that question it may be useful to review how the majority of CRE deals in the last 5 years were put together. I wrote in Small-Cap Recap: What's Behind Real Estate Cap Rates?:“As late as 10 years ago institutional investors had investment time frames of 5-10 years; today they are looking out 2-5 years at ...

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