“With downtown commercial property values down 30 percent from their highs in the summer of 2007, highly leveraged owners who bought at the peak are up against huge debt payments that will be extremely difficult to refinance. That is creating a situation where tenants are avoiding some “upside down” buildings altogether and taking extra steps to protect themselves against landlord foreclosure.”
∙ Invasion of the ‘zombie buildings’ [San Francsico Business Times]
Could someone with access be so kind as to C&P the entire article from the SF biz times?
How would tenants know if commercial landlords were upside down?
Here it is:
http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2009/03/16/story2.html?ana=e_ph
Even a dufus like me could see the Commercial Real Estate problems coming from pretty much a hundred miles away. Calculated Risk has been talking about it lagging the Residential collapse forever. My CRE short positions are up an average of 35% and I only got into them in January, way after you’d think anyone with any market predicting skills at all would have made their move.
Agreed, Valentino. I have been happily short commercial REITS since early- to mid-2008. Part of my portfolio looks like a little graveyard of REITs that have collapsed 70%+ (GGP short was up 98%+, but I did cover that one a few weeks ago), and I’m just hedging a bit by selling puts waiting for the one year anniversary, so I can cash them out at long term capital gains rates. It has been a very enjoyable wipeout, and the faster CRE collapses the better.
I agree that the CRE market got really stupid in 07. Related, mcklowe, GGP, etc. all got jacked big time. It just goes to show that big money and analysts with mba’s from fancy schools don’t mean sh!t.
As a small market player I have little sympathy for the ‘big boys’. They smoked on the crack pipe of impossibly high ‘projected rents’ and consequently got their asses handed to them.