real estate

Ranieri's firm shut down

Jim Kim — Mon, 10 Nov 2008 08:58:17 -0500

Well some of you might find some poetic justice in this: Lewis Ranieri, a one-time famous Salomon Bros. employee (made famous in Michael Lewis's Liar's Poker) and a towering figure in mortgage-backed universe, has just been forced to shut down the bank he formed after leaving Salomon Bros., the Financial Times notes. It would have been incredibly ironic if the bank was shuttered due to MBS concerns. As it turns out, Ranieri was said to have pushed the bank to avoid subprime exposure. Still, it's ironic enough that the bank was pressured by real estate construction loans. Franklin Bank will continue operating as part of Prosperity Bank of El Campo, TX.

For more:
- here's the FT item

Related Articles:
Lewis Ranieri news from FierceFinance

Big day approaches for Lehman Brothers

Jim Kim — Tue, 09 Sep 2008 12:57:32 -0400

The big day for Lehman Brothers is Sept. 18, the day it will announce a big third-quarter loss and most likely some capital raising plans. The conference call is going to be a doozy. Everything is at stake. There needs to be a Plan A, a Plan B and more plans down the alphabet. It would be best to announce a major deal. That may not happen. It's not clear at all that potential Korean investors will agree to anything. Indeed, the talks appear to be dead. (Ditto the private equity firms that took a look at some troubled assets.) Plan B may be to announce some sort of other capital event. Breakingviews reports that Lehman is indeed planning to spin off its real estate assets into a bad company, Spinco, leaving a good company, Cleanco. How they will be capitalized is still a mystery. Mr. Market is very worried.

For more:
- here's the Breakingviews article

High net worth customers can't get enough of alternatives

Jim Kim — Tue, 19 Aug 2008 12:52:57 -0400

We've noted the long-running debate about whether the accreditation requirements for hedge fund investors ought to be lowered. For many the rules strike a paternalistic note: The non-wealthy can't comprehend the risks. That has galled many over the years in part because they think most of the public is being denied access to really good investments. The latest from JPMorgan Private Bank, according to FINalternatives, is that clients are cutting equity allocations and boosting their share of alternatives, sometimes putting more than half their money into hedge funds, private equity funds and real estate. Within five years, most clients will have larger alternatives allocations than equity allocations. Does this reflect the superiority of alternative investments? Or aggressive sales practices? You can bet the advisers are making out well for pushing certain funds. Or a bit of both?

For more:
- here's the article from FINalternatives

Wachovia turnaround underway?

Jim Kim — Tue, 12 Aug 2008 08:08:23 -0400

The pressure is on for Robert Steel, the new CEO of Wachovia, who has raised the number of jobs the bank will cut. The AP reports that in a quarterly SEC filing, the bank says it expects to eliminate 11,350 positions, including 6,950 active employees and 4,400 open positions. That's about 600 more than previously planned. All will be in the mortgage area. Wachovia estimates that all cost-cutting steps will boost Tier 1 capital by more than $5 billion by the end of 2009. A lot is riding on the state of the real-estate economy. If the situation improves measurably, Wachovia would certainly benefit. To be seen as a pure play-like winner, it would need to clear up all the regulatory issues. The latest is that its municipal derivatives group is under investigation.

For more:
- here's the AP article

Bank of America: Another upside surprise

Jim Kim — Mon, 21 Jul 2008 08:18:50 -0400

Bank of America joined Wells Fargo, Citigroup and a handful of other bank that reported better than expected earnings for the second quarter. It posted a gain of 72 cents per share against expectations of about 50 cents per share. Of key interest, the bank announced the Countrywide deal will start adding to the bottom line this year and that cost savings will be higher than anticipated. Credit quality, however, continued to weaken. The bank took $3.62 billion in charges, and boosted its reserves against bad credits of $2.21 billion. Most of this was real estate related. Interestingly, investment banking income was the second highest ever. Remember when CEO Ken Lewis quipped he had all the fun he could handle in investment banking and all but vowed to exit the business? Good thing he didn't.

For more:
- here's the press release

Plan unveiled to shore up Fannie, Freddie

Jim Kim — Mon, 14 Jul 2008 08:52:39 -0400

Wow! To think that just a month or so ago, people were saying that the worst of the credit crunch had passed. That line of thinking clearly was way too premature. Not only did the Bush Administration has ask Congress this past weekend to approve a plan that would provide a credit line of some $300 billion to the troubled GSEs and buy their stock, but the Fed now will allow both Freddie Mac and Fannie Mae to borrow at its discount window. The government's hand was forced by a $3 billion Freddie auction scheduled for today. It pretty much has to go well, given the quick-trigger feel in the markets. So the credit crunch has hit Main Street in a huge way. It's unclear as of now exactly how much all this will cost Joe and Jane Taxpayer, but it looks like there will be a price to pay. This is stunning. The real estate industry may never be the same. Critics note that for years, people have argued that the twin pillars were poorly capitalized. But the bubble mentality in real estate prevailed. Until now.

For more:
- here's the Washington Post article
- here's a Washington Post article on the two GSE's reserves

Related Article:
Fannie and Freddie, the final shoe to drop?

And the top-ranked private equity firm is ...

Wed, 21 May 2008 06:59:56 -0400

Fortune has come out with a list of top private equity firms according to recent fund raising activity, and the big winner is the Carlyle Group. Yes, its mortgage-backed securities fund stumbled, but so did a lot of others. It's buyout and other funds fared well enough, apparently, to earn the top spot. The Blackstone Group, Kohlberg Kravis Roberts, Bain Capital, Warburg Pincus and TPG round out the top six. Out of nowhere: U.S.-based Advent International, which soared to 7th from not even being ranked the year before. It has specialized in European, middle-market type deals. Another newcomer: First Reserve, which came in 10th after being unranked in 2007. It's forte apparently is energy deals.

For more:
- here's the Fortune list

Tougher times in Greenwich, Conn.

Fri, 25 Apr 2008 06:59:58 -0400

Among suburbs preferred by hedge funds and more than a few top Wall Street executives, Greenwich ranks high. So how is it faring as Wall Street reels? Well, not even Greenwich is immune to the real estate crunch. According to the New York Times, about half a dozen foreclosure notices are sent each month in normal times. That spiked to 34 filings in January. But pain is relative. The Times notes that foreclosures are tricky legal matters here. People have a lot of resources they can call upon to find a way to stay in their homes. Truth be told, the crisis seems rather muted. In any case, it's not the type of place that generates a lot of sympathy, fairly or not.

For more:
- here's the article

Are we in for a wave of bank failures?

Thu, 24 Apr 2008 06:59:54 -0400

Remember the thrift crisis? Few people predicted the decimation of the S&L industry in the late 1980s and 1990s. Many went under due to imprudent real estate lending and, in some big-name cases, fraud. The pundits have yet to seize on this analogy, but it makes sense in light of comments John Dugan, the Comptroller of the Currency, made to the Financial Times that we may be in for some outright bank failures. Smaller banks that perhaps lent too aggressively for condo projects and some commercial properties are in for some turbulence. Failures may not rise to S&L levels of course. But given that there have been almost no commercial bank failures in recent years, any sort of uptick would be significant.

For more:
- here's the Financial Times article

Credit crunch deals fair hand to BlackRock

Fri, 18 Apr 2008 06:59:55 -0400

BlackRock has emerged as something of an asset management bellwether. It's narrow earnings miss in the first quarter was not seen as any cause for alarm. In many ways, the crisis has been good for the company. True, it had to take $24 million in losses on co-investments in real estate and hedge funds, notes Financial News Online. But look at its new business development. The pipeline is flowing, as it added $62.5 billion in long-term portfolio liquidation assignments. The company is aggressively hiring to staff these assignments, all of which generate revenue. CEO Larry Fink is promising something "very large" in the second quarter in this area.

For more:
- here's the Financial News Online article