katelynriwv: foreclosure list

With office space selling 30% below the 2007 high in the top-10 US office markets, and with lease rates still falling, one should expect to see more foreclosures in major cities.

Chicago is about to be hit says Crain's Chicago Business in Office tower at 500 W. Monroe flirts with foreclosure — again

A Georgia firm that holds two junior mortgages on the 46-story tower at 500 W. Monroe St. says the building's loans went unpaid when they came due this month and that the company may foreclose and take control of the property.

It would be the first foreclosure of a major office tower in the Loop in 11 years and a sign that the market remains mired in the hangover of the debt-stoked valuation bubble that peaked in mid-2007. That's when Broadway Partners Fund Manager LLC, a once high-flying New York firm, bought 500 W. Monroe for $336.7 million, with a package of loans that made up more than 95% of the purchase price.

“These are the situations that have gotten awfully complex,” says Dan Fasulo, managing director at New York-based Real Capital Analytics Inc., a commercial real estate research firm. “This one looks untenable.”

Mr. Fasulo reckons that 500 W. Monroe could be worth about $240 million today, based on an estimate of the building's net operating income and the return investors would expect since the tower is just 70% leased. That would put its current value at roughly 30% below the 2007 purchase price, a decline in line with national trends. A report last week by New York-based Moody's Investors Service showed property values in the top 10 U.S. office markets have plummeted 31% since the 2007 peak.

Should 500 W. Monroe fall into foreclosure, it's unlikely to be the last, given the recession-stymied demand for office space and the wave of big loan maturities in coming years. Lenders so far largely have been willing to extend those loans, but that could change.

“This is an early canary in the coal mine,” says Rick Schuham, a Chicago-based executive vice-president at Studley Inc., a firm that represents office tenants. “There are plenty of tough stories out there.”

Big Wave of Commercial Foreclosures Coming

Bernanke's stimulus efforts did next to nothing for residential housing, and absolutely nothing for commercial real estate. With a wave of maturities coming due, and with lease prices still dropping, pressures on commercial real estate are enormous.

Moreover, it is crystal clear that the economy is headed back towards recession, assuming of course one believes the recession that started in 2007 ever ended.

I suggest the recession never ended in light of the fact 3rd Quarter GDP Likely Negative.

How much patience lenders have in a weakening economic environment to restructure loans remains to be seen, but surely it isn't infinite.

Big Wave of Bank Failures Coming

Given that regional banks are in general the ones with the most commercial real estate exposure, it should not be too difficult to look one step ahead and see the effects of another economic downturn on mid-sized banks.

Recovery a "Statistical Mirage"

Brace yourself because the recovery of 2009 was nothing but a statistical mirage fueled by unsustainable government spending and bank bailouts. That mirage is rapidly fading off into the sunset.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

The worst of the fallout from the burst housing bubble continues to be highly localized. Metros in California, Nevada, and Florida have the most troubled housing markets, according to our new Housing-Mortgage Stress Index. Nearly half of the metros on the list—nine of the top 20, including all five of the top five—are in California: Stockton, Modesto, Vallejo-Fairfield, Riverside-San Bernardino-Ontario, and Bakersfield-Delano, along with Fresno, Visalia-Porterville, Sacramento and Salinas. Six Florida metros make the list—Miami, Orlando, Port St. Lucie, Deltona-Daytona Beach-Ormond Beach, Lakeland-Winter Haven, and Palm Bay-Melbourne. Las Vegas and Reno, Nevada, Phoenix, Provo, Utah, and Greely, Colorado, round out the 20 most stressed housing markets.

At the height of the boom, real estate, housing, and construction-related industries accounted for more than a quarter of the entire economies of Las Vegas, Miami, and Phoenix and 30 percent of Orlando’s, as I note in The Great Reset. It was like a giant Ponzi scheme, fueled entirely by debt. The hardest-hit Sun Belt metros lacked the underlying economic heft to support their skyrocketing housing values; some of them may never recover.

If we look at just large metros—those with more than 1 million people—Tampa, Detroit, Atlanta, San Diego, Jacksonville, Washington, D.C., Virginia Beach, Chicago and L.A., show high levels of housing-mortgage stress, along with the five noted above—Riverside, Las Vegas, Orlando, Phoenix, Sacramento, and Miami.

The Housing-Mortgage Stress Index shows the U.S. metros whose housing markets—and homeowners—face the highest levels of stress and danger of foreclosure and falling prices. The index is based on three variables.

Gallery: Worst Real Estate Cities

A Georgia firm that holds two junior mortgages on the 46-story tower at 500 W. Monroe St. says the building's loans went unpaid when they came due this month and that the company may foreclose and take control of the property.

It would be the first foreclosure of a major office tower in the Loop in 11 years and a sign that the market remains mired in the hangover of the debt-stoked valuation bubble that peaked in mid-2007. That's when Broadway Partners Fund Manager LLC, a once high-flying New York firm, bought 500 W. Monroe for $336.7 million, with a package of loans that made up more than 95% of the purchase price.

“These are the situations that have gotten awfully complex,” says Dan Fasulo, managing director at New York-based Real Capital Analytics Inc., a commercial real estate research firm. “This one looks untenable.”

Mr. Fasulo reckons that 500 W. Monroe could be worth about $240 million today, based on an estimate of the building's net operating income and the return investors would expect since the tower is just 70% leased. That would put its current value at roughly 30% below the 2007 purchase price, a decline in line with national trends. A report last week by New York-based Moody's Investors Service showed property values in the top 10 U.S. office markets have plummeted 31% since the 2007 peak.

Should 500 W. Monroe fall into foreclosure, it's unlikely to be the last, given the recession-stymied demand for office space and the wave of big loan maturities in coming years. Lenders so far largely have been willing to extend those loans, but that could change.

“This is an early canary in the coal mine,” says Rick Schuham, a Chicago-based executive vice-president at Studley Inc., a firm that represents office tenants. “There are plenty of tough stories out there.”

Gallery: Worst Real Estate Cities

robert shumake

katelynriwv

Tuesday, September 21, 2010

foreclosure list

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