â¢Wilbur Ross Sees `Huge' Commercial Property Crash Ahead for U.S. Assets
http://www.bloomberg.com/apps/news?pid=20601087&sid=afjAIKWhvFeQ
Wilbur Ross Sees âHugeâ Commercial Real Estate Crash (Update1)
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By John Gittelsohn and Thomas R. Keene
Oct. 30 (Bloomberg) -- Billionaire investor Wilbur L. Ross Jr. said today that the U.S. is at the beginning of a âhuge crash in commercial real estate.â
âAll of the components of real estate value are going in the wrong direction simultaneously,â said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. âOccupancy rates are going down. Rent rates are going down and the capitalization rate -- the return that investors are demanding to buy a property -- are going up.â
U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to the property research firm Real Capital Analytics Inc. The Moodyâs/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moodyâs Investors Service said Oct. 19.
Ross, chairman and chief executive officer of WL Ross & Co. LLC, said in an interview on Bloomberg Radio that he would use âextreme cautionâ before putting money into commercial real estate, especially office space, because properties are losing tenants.
U.S. office vacancies hit a five-year high of almost 17 percent in the third quarter, while shopping center vacancies climbed to their highest since 1992, according to the property research firm Reis Inc.
âI think itâs going to take quite a while to work itself out,â Ross said.
Ross and PPIP
As of Oct. 15, Ross said he had spent less than $100 million of at least $1.5 billion available to him under the Public-Private Investment Program, an investment pool of private and government money for purchasing distressed assets from financial institutions.
Ross used the funds to purchase mortgage-backed securities tied to retail properties, he said in a Bloomberg Television interview.
In 2007, Ross ventured into the declining residential real estate market, winning an auction for the home-loan servicing unit of Melville, New York-based American Home Mortgage Investment Corp. He agreed to pay between $435 million and $500 million for the right to collect payments and maintain escrow on about $45.3 billion of home mortgages.
Dubbed the King of Bankruptcy by clients during his quarter century at the Rothschild investment bank, Ross, 71, entered the U.S. home mortgage business as an increasing number of borrowers quit making payments and profits sank in loan servicing.
To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.
Last Updated: October 30, 2009 11:20 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=afjAIKWhvFeQ
Wilbur Ross Sees âHugeâ Commercial Real Estate Crash (Update1)
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By John Gittelsohn and Thomas R. Keene
Oct. 30 (Bloomberg) -- Billionaire investor Wilbur L. Ross Jr. said today that the U.S. is at the beginning of a âhuge crash in commercial real estate.â
âAll of the components of real estate value are going in the wrong direction simultaneously,â said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. âOccupancy rates are going down. Rent rates are going down and the capitalization rate -- the return that investors are demanding to buy a property -- are going up.â
U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to the property research firm Real Capital Analytics Inc. The Moodyâs/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moodyâs Investors Service said Oct. 19.
Ross, chairman and chief executive officer of WL Ross & Co. LLC, said in an interview on Bloomberg Radio that he would use âextreme cautionâ before putting money into commercial real estate, especially office space, because properties are losing tenants.
U.S. office vacancies hit a five-year high of almost 17 percent in the third quarter, while shopping center vacancies climbed to their highest since 1992, according to the property research firm Reis Inc.
âI think itâs going to take quite a while to work itself out,â Ross said.
Ross and PPIP
As of Oct. 15, Ross said he had spent less than $100 million of at least $1.5 billion available to him under the Public-Private Investment Program, an investment pool of private and government money for purchasing distressed assets from financial institutions.
Ross used the funds to purchase mortgage-backed securities tied to retail properties, he said in a Bloomberg Television interview.
In 2007, Ross ventured into the declining residential real estate market, winning an auction for the home-loan servicing unit of Melville, New York-based American Home Mortgage Investment Corp. He agreed to pay between $435 million and $500 million for the right to collect payments and maintain escrow on about $45.3 billion of home mortgages.
Dubbed the King of Bankruptcy by clients during his quarter century at the Rothschild investment bank, Ross, 71, entered the U.S. home mortgage business as an increasing number of borrowers quit making payments and profits sank in loan servicing.
To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.
Last Updated: October 30, 2009 11:20 EDT
