Research Zeitgest: Trouble At The Mall
Commercial real estate continues to be a hot topic among visitors to Research Recap. And while there’s a general consensus that times are bad, there’s disagreement on how bad and whether they are bad enough to prompt widespread downgrades and defaults.
The Chapter 11 bankruptcy filing of General Growth Properties, which controls many of America’s leading shopping malls, led Fitch to downgrade the outlook for a bunch of related CMBS transactions to negative. Despite the GGP filing, CreditSights reiterated its view that no major REIT is likely to default.
George Soros does not seem to agree. Speaking on The Diane Rehm Show, Soros predicted that many commercial real estate loans would not be renewed. He noted that the typical commercial real estate loan covers 85% of the value, whereas prices have fallen by 30% or more. Moody’s commercial property price index is down about 21% from the peak, but Moody’s also notes that “few CMBS loans maturing in the next two years are from vintages with more than 10% price depreciation.” And as reported in our last Zeitgeist, Fitch says REITs are facing headwinds maintaining adequate liquidity to meet ongoing funding obligations.
Our most popular recent post was Oxford Analytica’s prediction that the global recession could lead to emerging markets countries to trigger a round of currency devaluations. This was followed by Fitch’s analysis of the drastic drop in cigarette sales volumes.
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