Posted on 12/02/2009 1:48:16 AM PST by TigerLikesRooster
What Dubai Means for U.S. Commercial Real Estate
"Delay and Pray" Can't Continue For Long...
By Ian Cooper
Tuesday, December 1st, 2009
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It's only a startling reminder of how fragile U.S. commercial real estate is, especially with certain U.S. properties sitting in Dubai World's portfolio. These include MGM Mirage and the $8.5 billion CityCenter project; the Mandarin Oriental and W hotels in New York; a 50% stake in the Fontainebleau Miami beach resort; and Barneys New York Inc.
All Dubai has to do is unload some of its properties... and commercial real estate prices will plunge. It's already seen its commercial real estate prices cut in half from 2008 highs.
Sure, it's still too early to tell what Dubai will do. But it's another look into how close we are to a complete commercial real estate meltdown.
Things Could Deteriorate Further
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My colleague — Steve Christ — sees this as a recipe for disaster... and industry leaders have estimated that 200,000 businesses and 10 percent of the nation's shopping malls will close their doors over the next year. (You can read more about Steve Christ's views on commercial real estate here).
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So, with roughly $530 billion in commercial mortgages coming due for refinancing in 2009-2011, and some estimates showing that as many as 68% of loans maturing during that time will fail to qualify for refinancing, Steve says one has to wonder how it will all get done.
The brutal answer: it won't.
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"So far, banks in general have been reluctant to take losses on their commercial books," says the Wall Street Journal. "This 'delay and pray' strategy is preventing most banks from issuing new loans as they prepare their balance sheets for potential future losses... "
Stay Ahead of the Curve,
Ian L. Cooper
(Excerpt) Read more at wealthdaily.com ...
Ping!
‘All Dubai has to do is unload some of its properties... and commercial real estate prices will plunge. It’s already seen its commercial real estate prices cut in half from 2008 highs.’
Except the commercial real estate collapse here, was already here...just being prolonged til after the New Year...
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