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Thread: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

  1. #1

    Default Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    (CBS/AP) Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.

    Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

    That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.

    "We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

    That's bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

    Retail stores were busy Thursday putting the finishing touches on efforts to draw customers in, despite the battered U.S. economy, reported CBS News correspondent Seth Doane.

    "This is it, we're at the end," said Barbara Cook, head of stores for Gap, Inc. "What you're seeing is the finish line of the whole kind of retail chain here."

    Eighty-nine percent of shoppers plan to spend the same, or less, than they did last year. Only 11 percent plan to spend more.

    Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.

    But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.

    "It's a toxic drug and nobody knows how bad it's going to be," said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.

    Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

    The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

    Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.

    Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.

    Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.

    California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.

    The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won't write mortgages as long as investors won't purchase them.

    "Credit markets have seized up," corporate securities lawyer Michael Gambro said. "People are not willing to take risks. They're not buying anything."

    That drives down investments already on the books. Insurance companies are seeing their stock prices fall on fears they are too invested in commercial mortgages.

    "The system has never been tested for a deep recession," said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.

    One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.

    "He's created havoc in the marketplace by changing the rules," Rosen said. "It was the stupidest statement on Earth."

    The Securities and Exchange Commission is considering another option that might ease the crisis, one that would change accounting rules so banks don't have to declare huge losses whenever the market declines.

    But the only surefire remedy is for the economy to stabilize, for businesses to start expanding and for investors to trust the market again. Until then, Tross said, "There's going to be a lot of pain going forward."
    [B]Carlos Gonzales[/B]
    [B]New Look Power Wash
    [URL="http://www.newlookpowerwash.com"]Pressure Wash in California[/URL][/B]
    [URL="http://www.newlookpowerwash.com/category/uncategorized"][B]California Pressure Washing Blog[/B][/URL]
    [B][URL="http://www.newlookpowerwash.com/california-pressure-wash-blog/pressure-wash-services-in-san-francisco.html"]Pressure Wash Services in San Francisco[/URL][/B]

  • #2

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Next thing you know the retail outlets will be wanting a Bail Out

    Serving Bryan-College Station-Huntsville-Madisonville Texas Area

  • #3

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Quote Originally Posted by Lightning Gene View Post
    Next thing you know the retail outlets will be wanting a Bail Out
    Gene...they are already asking for it...I read that in the paper today!!
    [B]Carlos Gonzales[/B]
    [B]New Look Power Wash
    [URL="http://www.newlookpowerwash.com"]Pressure Wash in California[/URL][/B]
    [URL="http://www.newlookpowerwash.com/category/uncategorized"][B]California Pressure Washing Blog[/B][/URL]
    [B][URL="http://www.newlookpowerwash.com/california-pressure-wash-blog/pressure-wash-services-in-san-francisco.html"]Pressure Wash Services in San Francisco[/URL][/B]

  • #4

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Quote Originally Posted by Carlos View Post
    Gene...they are already asking for it...I read that in the paper today!!
    (First Carlos, this is in regards to air filter service, not concrete, and this is Las Vegas)

    Four of my shopping centers are under 50% occupied.

    Most of the others are down too.

    These are customers I've had for at least 2 years that were full when I took them on.

    The PM's want me to credit them for empty anchor stores.

    I do it if they shut off the AC completely so I don't even have to check them.

    It's killing my gross.

    The PM's are telling me it's going to get a lot worse because they are allowing businesses to stay in the place 8-12 months behind in rent in the hopes they will see something down the road. It's a buyers market in the retail area and with half the center empty it is in their best interest to let the late payers stay until things turn around and just write off the losses.

    My only defense is to shore it up and do a better job than the competition. When the market thins out I want to be the one standing.

    It's already working.
    Sonitx
    702-358-7477





    Free FREE Events www.uamccevents.com

  • #5

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Tony - we are experiencing the same thing up north from you in Calif. Strip Malls are empty or clost to it. Newly built commercial buildings are empty and are still waiting for their first tenants. Interesting times....
    [B]Carlos Gonzales[/B]
    [B]New Look Power Wash
    [URL="http://www.newlookpowerwash.com"]Pressure Wash in California[/URL][/B]
    [URL="http://www.newlookpowerwash.com/category/uncategorized"][B]California Pressure Washing Blog[/B][/URL]
    [B][URL="http://www.newlookpowerwash.com/california-pressure-wash-blog/pressure-wash-services-in-san-francisco.html"]Pressure Wash Services in San Francisco[/URL][/B]

  • #6

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Restaurants same shape !
    Diamond Jim's LLC
    Wood & Stone Restoration
    Pressure Cleaning
    Waterbury CT

    James Foley

  • #7

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Huh, Fenner, it's just like you told me. You got a magic ball!
    Daniel Tambasco
    Just Plain Painting
    Gutter Cleaning MA
    Deck Restoration Contractor
    978-749-9808

  • #8

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Carlos, There was a 60 Minutes segment a few weeks ago concerning Commercial Properties and other type of future foreclosures (bad loans). Basically saying the next phase of failures would be worse than we've already seen. This was a very interesting guy that the segment was about.
    Diamond Jim's LLC
    Wood & Stone Restoration
    Pressure Cleaning
    Waterbury CT

    James Foley

  • #9

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    I hear you Jim.

    A handful of washers that I have spoken to that are in commercial work have told me that they are seeing delays in getting paid for up to 60-90 days. According to them this "trend" in them not getting paid in the normal net 30 days was something that started a few months ago.

    I for one have aged receivables in the 5 figure range from last year ~ all of them in the 120+ day category. I am making one last push to "collect" before I concede to writing them off. I am not holding my breath as I noticed a For Sale sign on one of the properties in which the owner owes me 16k.
    [B]Carlos Gonzales[/B]
    [B]New Look Power Wash
    [URL="http://www.newlookpowerwash.com"]Pressure Wash in California[/URL][/B]
    [URL="http://www.newlookpowerwash.com/category/uncategorized"][B]California Pressure Washing Blog[/B][/URL]
    [B][URL="http://www.newlookpowerwash.com/california-pressure-wash-blog/pressure-wash-services-in-san-francisco.html"]Pressure Wash Services in San Francisco[/URL][/B]

  • #10

    Default Re: Next Round Of Foreclosures To Hit Retail ~ What do you Think?

    Quote Originally Posted by Carlos View Post
    I hear you Jim.

    A handful of washers that I have spoken to that are in commercial work have told me that they are seeing delays in getting paid for up to 60-90 days. According to them this "trend" in them not getting paid in the normal net 30 days was something that started a few months ago.

    I for one have aged receivables in the 5 figure range from last year ~ all of them in the 120+ day category. I am making one last push to "collect" before I concede to writing them off. I am not holding my breath as I noticed a For Sale sign on one of the properties in which the owner owes me 16k.

    File a lien on them so you can get paid first Carlos

    Serving Bryan-College Station-Huntsville-Madisonville Texas Area

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