Bulk Commercial & Retail is coming

The banking industry has in my limited opinion done a very poor job of managing the sales of Bulk SFR related properties. The market is imperfect and flawed and has created an intermediary system that has no rules and which is populated with more greed and broker chains than one could have thought possible 18 months ago.

We have been in this business long enough to know the signs of impending seed changes. The commercial and retail market place has until now only been marginally impacted by the large numbers of lost tenants and business bankruptcies. But begining this month that will become old history. The commercial market is about to melt down the reasons for this I will enumerate shortly.

Today I talked with a Money guy in San Francisco and he told me something I have been hearing for over a month. He is a Californian and knows the LA market well. What he told me reflects the smart money on the street today.

In a nut shell here is what he said, "We see the SFR market collapsing another 20 points here in the state. We have changed our buying pattern to Non-performing Notes on Multi-family properties nation wide. We are taking the money out the state. The perception that California will recover first is flawed. We will purse cash flow now. We no longer want any retail regardless of location or commercial."

Twenty minutes afte I posted this message this came out on CNBC

US Home Prices Seen Falling 40% Overall: Analysthttp://www.cnbc.com/id/31713614

I have heard this two dozen times over the past 72 hours and this tells me that something is up. I know from past research the Refinance funds available for commercial & Retail North American ops is about

1/3

of the funding required!!

What happens to the rest of the commercial refies? Where will the property owners turn and how will most with

greatly

reduced borrowing power and lower credit status get replacement funds.?

Then there is the issue of failures. Many projects will fail and the banks will step in and file foreclosure. Normally this is somebody’s Yahoo moment however this time there is a vile problem in the foreclosure path. Remember the securitization stuff. Most commercial loans tend to exceed the limit a bank can lend to one client so the banks band together in participation and fund loans to sub division, high rise, and strip commercial center developers.

The resulting loans are then sold off to wall street firms that bundle them into Bonds that become tools in the CDS CBO and other markets.

So on the day of the BK or Foreclosure hearing who will show up to represent the lender. Not 1 or 2 lawyers, maybe 20 or more. Talk about a Cluster ****. The commercial banks have a massive problem on their hands and regardless of what they say they are in big trouble.

Remember this when you are offered a Mezz B note on a Mega project. it is cheap because the sellers do not want the court room expenses!