Landmark Links March 15th – Crack Kills


Lead story…. Commercial real estate has been booming for several years and CMBS is the second most popular means of financing commercial deals. A typical CMBS loan is 10 years in duration and its no secret that there are a ton of CMBS maturities coming down the pipe starting this June.  In other words borrowers were really hooked on this stuff around 2006, which is probably the least surprising thing you’ve read today. Unfortunately, global turbulence in the credit market recently reared it’s ugly head, creating chaos in the CMBS market just when CMBS liquidity was needed the most in order to refinance some of those maturities, leaving some serious cracks in the commercial real estate capital stack.


The Billion Dollar Question: There are plenty of signs starting to pop up that the tech boom/bubble is deflating rather than popping as the last one did in 2000-2001. Will a deflating bubble turn out better than a popping one? Only time will tell. See Also: Tech founder throws cold water all over the state of the tech market (basically says “we need to actually make money at some point”) in a layoff email.

Growing Pains: Peer to peer lending is a relatively new asset class and it’s about to get it’s first real taste of adversity after Moody’s downgraded junior tranches of securitized bond just weeks after it was sold citing a “faster buildup of delinquencies and charge-offs than expected.”  That doesn’t sound good.  Moody’s had given the bond a credit rating only eight weeks earlier.  At least they acted quickly this time rather than sitting on their hands like they did when mortgage loans were defaulting left and right in 2008.

Heads I Win, Tails You Lose: Speaking of which……S&P, Moody’s and Fitch are stronger than ever, issuing more than 95% of global bond ratings while raking in record profits despite playing an out-sized role in causing the housing crash.


Hot Property: Strip malls are about as far as you can get from trophy properties.  They aren’t located in CBD’s are often ugly and don’t typically have flashy, high-end tenants.  However, in a world where financial uncertainty reigns, these un-sexy properties are in high demand among REIT investors looking for properties that perform well when the economy hits a rough patch.

Quick Flip: Blackstone is on the verge of selling Strategic Hotels & Resorts Inc. to a Chinese insurance company after taking the hotel operator private in December.  No official numbers have been released but Blackstone is expected to turn a healthy profit after just 4 months.

Going Green: Big retailers are going solar to hedge their electricity costs.


The Ultimate Stimulus: Despite being hated by almost everyone, federal lending programs have accounted for nearly $800MM worth of economic stimulus since the Great Recession.

Greener Pastures: The suburbs are suddenly in vogue again as Millennial buyers come to grips with getting priced out of the urban core and settle for a yard and a commute.

Supply Issues: Luxury rents fell 4.2% in Manhattan this February as high-end condo investors fought over a relatively small renter pool.  We are seeing signs of this in other high end markets as well.  Developers have focused the vast majority of their efforts on a very narrow segment of the population coming out of the downturn while low supply enabled them to raise sales prices and rents.  Now they are paying the price as a large number of units are getting completed at the same time, creating a potential supply issue.


Til Debt Do Us Part: Specialty investment funds are making big bucks financing divorces for wealthy borrowers.

The Anti-Buffett: Vladimir Putin has arguably been the world’s worst investor over the past 18-months.  He has essentially made his country 100% dependent on energy and commodities while going on a borrowing binge.  Then he intervened in the forex market to try to stabilize the ruble when it was getting hammered in 2014, failing miserably while blowing through $80 billion in foreign currency, causing it to plunge further. Russian interest rates are now at 11% with inflation last quarter running at 12.9%.  To summarize: the Russian economy is a grease fire and Putin poured water on it.  Side note: If I end up getting kidnapped and thrown in a Siberian gulag in the next 72 hours, the above paragraph will most definitely be the reason why….

Ignored: After a very rough start, the Chevy Volt has evolved into a very attractive alternative to the Prius.  So why doesn’t anyone actually want to own one?

Chart of the Day


Yummy: The list of the worst restaurant health grades in America is disgusting and hysterical at the same time.

Let it All Hang Out Part I: An overweight completely man walked into Nashville International Airport a couple of weeks ago.  He didn’t make it far.

Let it All Hang Out Part II: An obese, naked woman climbed on top of a truck in Houston and started dancing, causing a major traffic jam in both directions reminding drivers that commuting is, at it’s core a slow painful death.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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