Is it a commercial real estate crunch or a separation of wheat and chaff?

I say the latter. Why? You had to expect that over-levered and too-optimistic deals were going to tank. Yes, the credit crunch is hitting commercial properties, especially when you want to do a high LTV deal. I'm not so sure whether that means it is a crunch or just plain sanity.

Take today's Journal article on high-profile defaults and the Macklowe saga for refinancing. What is the leverage on the Eichner project, which is a casino/condotel in Vegas? (Gee, think we have a few of those around?) And how highly levered is Harry Macklowe again? These guys have made fortunes, as the article says, "living on the edge." Not everyone is that edgy, so to speak.

So I'm not going to be a lemming, even if, as Moody's predicts, "the corporate default rate for the construction and building industry could reach 12% this year and...6%...in the hotel, gaming and leisure industries." Why? The opportunistic investors are waiting, ready to pounce. One told me last week that s/he expected to have a huge year picking up properties from the people who did not invest wisely.

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