Most commercial real estate loans are written to have a term of about seven to ten years with an amortization schedule of 20 to 30 years, hence at maturity have a balloon payment due. That balloon payment must be satisfied by a refinancing or a sale of the property. That's a risk that so many participants brushed aside when times were good and money freely available. Now those balloons are causing pain for both the owners and the lenders.
Battleship Ben sketched out some plans to provide enough support for the commercial real estate loan market to help it get over this crunch, but nothing significant was done. Today's WSJ reports that a first step might occur soon to open the market for commercial real estate loans.
From Briefing.com: "The Wall Street Journal reports Vornado Realty Trust (VNO) is planning on raising between $550 mln and $600 mln through a bond sale that would qualify for a key government program aimed at resuscitating the commercial-property market, according to people familiar with the matter. The potential deal, along with two by shopping-center giant Developers Diversified Realty (DDR), would be among the first batch of offerings of commercial mortgage-backed securities that will take advantage of the TALF program. Those deals are expected to hit the market in the fall, these people say."
This is the last piece needed to clear the financial markets of debris from the last year's wreck and bring about normal conditions. If it works or seems to be going to work, I expect commercial real estate and REITs to move up strongly. I need to add some money to that asset class. I'll be watching closely.
Nothing. I'm back to looking for a few good stocks that can go up at least 50% in six months.
I decided to re-learn Latin, too. [I had three years of Latin in high school many moons ago.] I pondered trying ancient Greek, but I had enough pain 37 years ago with Russian to know that a language with a different alphabet is another level of difficulty that I don't need now.
Word of the Day
"Prevenient" - adjective, formal [$10]
Prevenient means preceeding something else.
Sentence: Saving is necessarily prevenient to investment. Obama's proposed huge increase in taxes on people having the most disposable income to save must cause a drop in investment. This lesson was learned in the 1970s. Do we have to re-learn it ?
La Palabra de la Semana
"Pensare" - verb, regular -are conjugation
Pensare means to think.
La frase: Io penso, perciò io sono. [I left the pronoun "Io" for emphasis.]
Sentence: I think, therefore I am.