Floridabuilder has a new blog post up:
Based on the distress I am seeing today, I now believe that the public homebuilders WILL in fact retest their lows of mid January......... in other words, I am much more bearish than I was the past 60 days.................. Why?
Because now that we have capitulation, I am finding that the bidders for these deals are either one party or two............ that is about it............. If you are selling an asset in distress and you have one or two parties bidding will you get a fair price? NO............. this is what happens when you are a debt holder and you screw around and flip people off because your offended at the offer prices that you were receiving in 2007........ The fact that these deals have at the most two parties bidding and only in rare instances more than two parties tells me that the amount of write offs are going to be ugly........
I was on the East Coast today meeting with a party that raises equity and debt...... here are his thoughts
Debt
CMBS variable rate market shut down and this was a significant portion of the debt raised for commercial deals........ translation..... fewer people can buy commercial RE, which means lower valuations
Banks don't have the capacity to lend (again this is from an executive on the east coast who does this for a living, since I don't have a clue about this area)
Banks can charge 300 basis points over prime and not have to do funky deals....... translation, I think he meant that in the past in order to charge a high interest loan the deal had to be risky, whereas now, the bank can over charge you on a normal good deal because you have so few options....... translation 2...... if debt is more expensive it comes out of the valuation of the property, since you can't pay as much
Diversification.......... banks who used to chase 200 million dollar deals, now only want 50 million dollar deals.......
Equity
Equity players have a lot of money on the sidelines
Equity side wants a story...... they want DISTRESSED deals only
Normal deals that used to be what these guys wanted (e.g. commercial, retail, high rise in great infill area of Dallas, Boston, etc...) no one wants these deals....... they only want Distressed.... everyone wants to steal a deal
So if everyone wants distressed how come there are so few bidders per deal......... BECAUSE....... there are so many distressed deals that even if everyone wants a deal you still can't buy up all the distress
There you have it.................. I have not been as bearish as some of the others on the boards, I base my opinions strictly on what I am seeing in the market......... and because I am seeing deals across the country that are of significant size, I feel confident that I am not passing on bad information......... my friends at the public homebuilders are providing me less than stellar reports... not end of the world, but again this is spring selling season so less than stellar is actually pretty bad.........
Oh....... to the question on whether or not CTX sold their huge land package............ I am told the answer is no and they are piece mealing it out......
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