A Real estate mogul risks it all - Feb. 15, 2008
The story linked shows the perils of short term borrowing to finance long term assets. The infamous NY real estate investor Macklowe is in a bind. Financing has dried up on his recent purchase of prime commercial buildings in NY from the Blackstone Group. He is scrambling to put financing together to satisfy the short term borrowing he used to buy these buildings. However there is no one willing to lend. That might force the sale of some of these buildings, and if a sale happens the price could provide some clues to the health of the commercial real estate market.
A lot of media publications and analysts are calling for the implosion of the commercial real estate market in the same manner the US housing market is unravelling. There are a lot of retailers reducing their outlets and slamming on the brakes for further expansion. Lack of financing availability does not help either. However I do not think that commercial real estate will cause the same havoc as housing for the simple fact that commercial real estate generates cash flow to maintain its value as opposed to houses that provide only shelter to its homeowner.
The piece is good and the events to follow will be interesting to see how it will unfold. Business in such an environment is far more exciting to follow than say a couple of years ago.
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