For the past year, the fate of commercial real estate in the
Given that a good portion of these properties are underwater, and the fact that banks are still reluctant to lend, the concern that many of these loans won’t get refinancing seems valid.
Already, we have seen companies simply walk away from properties that are losing money, turning the keys over to the banks that hold the mortgages. Maguire Properties (NYSE:MPG) has done it. And we’ve seen BlackRock (NYSE:
For shareholders, these moves make sense because it’s better than throwing good money after bad. For Maguire, it was a matter of life or death for the company.
Still, it’s a concern because someone has to step up and buy the impaired real estate from the banks. Otherwise, bank balance sheets are saddled with even more toxic assets, capital bases fall, lending dries up and the whole financial crisis gets repeated again.
Interestingly, it may be the Chinese who help the
General Growth Partners (NYSE:
A $44 stock in May of 2008, General Growth fell below $0.50 a share as it declared the largest property bankruptcy ever in the
General Growth has managed to restructure $11.6 billion of $14.9 billion in property related debt and is reportedly close to a deal for another 24 loans totaling $1.5 billion. It’s trying to emerge from bankruptcy.
There is value in General Growth’s assets. Simon Property Group (NYSE:
The plan is for General Growth to raise additional funds, bringing the entire deal to $15 a share for General Growth. It’s clear that General Growth’s investors believe the company is worth more than the $9 a share that Simon Properties offered.
So, what’s this got to do with
The CIC currently has $300 billion to invest. It’s reported that it may have made $10 billion last year. That’s pretty good, compared to the results of other sovereign wealth funds, like
So successful, in fact, that Reuters is reporting that
CIC recently filed its first ever 13-F form with the
The point here is not so much what the CIC is buying, but the fact that it is openly disclosing its holdings. That’s more transparency than we get from middle-eastern sovereign wealth funds, which don’t disclose their investments, but rather let their investment managers handle the disclosure, thereby masking who the ultimate investor is.
I suspect that
Transparent filings may help
We also know that
And so it could be, in fact I think it is highly likely, that the strength we’ve seen from Maguire Properties and other commercial real estate entities is related to growing interest from China.
This will take a while to fully play out. And I will be watching any developments with interest. I’ll let you know what I find out…