Be warned! Smart Money Now exiting Real Estate - Beginning of the End
mamboni comments: the hedgies and venture capital specs leveraged up RE prices with cheap money from the FED. Now they are selling at the top because the smart money knows when the top is the top. It's that simple. As soon as they unload their RE onto the public pensions funds and 401Ks, the markets will implode and wipe out what is left of the middle class paper assets. This is exactly what will happen. Only the timing is uncertain: 2014? 2015? The top sucks from the bottom once again. So front run this: get out of paper and get out of RE investments. Get gold.
Wednesday Oct302013
The Smart Money Denies They’re The Smart Money As They Franticly Sell Their Crown Jewels Before The Bubble Blows Up
http://www.testosteronepit.com/unive...ransparent.pngWednesday, October 30, 2013 at 12:03AM
“It’s a great time to sell,” mused Anthony Breault, senior real estate investment officer at Oregon’s state pension fund.
And Blackstone Group, the world’s largest “alternative investment” firm, is doing exactly that, feverishly, relentlessly, hand over fist, at peak valuations, cashing out, maximizing its profits. That's how capitalism is supposed to work.
On the front burner: Brixmor Property, a REIT that owns 522 shopping centers, mostly neighborhood affairs anchored by grocery stores. Its IPO just priced at $20 a share, valuing it at about $6 billion – almost six times 2012 revenues of $1.17 billion. It starts trading on Wednesday. Blackstone will still own 73% of the common stock after the IPO, so the shares need to do well for a while before it can sell them. But it won’t be easy: last year, the REIT lost $61.4 million.
Another crown jewel Blackstone is selling: Hilton Hotels, which filed for a "much anticipated IPO" in September, as the Wall Street Journal called it in its way of hyping IPOs. It could be the largest real-estate IPO this year, and the largest hotel IPO ever. The roadshow might begin early December. Blackstone acquired it in 2007 with over $26 billion in debt. Its shares will be dumped at a hilariously inflated price while the Fed is still printing $85 billion a month to make that feat possible [for a scathing and entertaining analysis of the Hilton LBO, read David Stockman's..... Bernanke’s (Untough) Love Child: The $27 Billion Affair At The Hilton].
Next is La Quinta. Blackstone has already received a number of bids for the hotel chain, with a final round of bids expected in the next few weeks – though it might still get rid of it through an IPO if it brings more money that way.
Then there is Extended Stay America, now getting groomed to be slipped into your portfolio as well. One heck of a double-dip saga. Blackstone first bought it in 2004 for $3.1 billion, most of it funded with debt. In June 2007, at the peak of the prior credit bubble, Blackstone sold that over-indebted jewel for $8 billion. The buyer, Lightstone, had obtained $7.4 billion in funding from Wachovia, Bear Stearns, Citi, and other luminaries. “By then the leveraged lending market had finally gone berserk," Stockman explains.
With impeccable timing – because the smart money really knows what it is doing – the deal closed five days before Citi launched the roadshow for Blackstone's own IPO. The $2.1 billion in “profits” from the sale became an inducement to buy into Blackstone’s IPO.
In June 2009, exactly two years later, Extended Stay filed for bankruptcy. Much of its toxic debt was shuffled from the collapsing banks to the Fed and ended up saddling all Americans with Blackstone’s detritus.
In May 2010, when Extended Stay was discharged from bankruptcy, the new owner was, you guessed it, Blackstone in partnership with John Paulson’s hedge fund, this time for $4 billion. Once again with nearly free money from the Fed, they leveraged it up to the hilt. And now, at the peak of the current credit bubble, Blackstone is dying to unload it, but this time via an IPO because they can get even more money for this jewel [to enjoy Stockman’s take on the entire Extended Stay double-dip scam, start here, then here, here, and here.]
Blackstone has more jewels in its crown that it’s getting ready to sell, including IndCor Properties, a warehouse REIT, and Invitation Homes, the platform Blackstone created that maniacally gobbled up 40,000 single-family homes – inflating home prices along the way – and then tried to rent them out. They might head for your portfolio early next year.
Blackstone isn’t the only seller. So far this year, there have been 14 real-estate IPOs, including the Empire State Realty Trust Inc., owner of the Empire State Building, and American Homes 4 Rent. But since May, REITs have hit rough water. Worst loser: since its IPO in May, Ellington Residential Mortgage REIT is down 18%.
So 2013 is shaping up to be a huge year for sellers: "Property-related IPOs, including REITs, real estate operating companies and mortgage trusts, have had their biggest year since 2004 by money raised,” Bloomberg reported, based on data it compiled.
Stephen Schwarzman, Chairman and CEO of Blackstone, didn't make a secret of it during the earnings call on October 17: “So we're moving into a cycle now ... where the potential – nothing's guaranteed obviously – is very high for large amounts of realizations and consequent gains,” he explained. But he preemptively denied that any of this “greater realization activity” would indicate “that markets have peaked.” No way. “Some people always think we're just smart sellers,” he said. “It's not the case.”
Which brings to mind Blackstone’s Extended Stay saga.
Slightly higher interest rates, slightly less abundant liquidity, or an economy that might sink slightly deeper into its quagmire would pose serious risks to these highly leveraged projects. So the pressure is on for the Fed to keep the bubble going long enough to let the “smart sellers” unload their remaining shares at peak valuations and slip them surreptitiously via conservative-sounding mutual funds or ETFs into the portfolios, retirement funds, and 401(k)s of the working folks.
And the Fed, perhaps seeing its handiwork incomplete with this many IPOs and so much smart money up in the air, decided to abandon its taper considerations in September. It might keep printing money until the great rotation from private equity and hedge funds to retail investors and retirement funds has been accomplished. Once tucked away in these portfolios – we’ve seen how that worked in 2000 and 2007 – some stocks will decompose slowly, others will blow up rapidly, which is not to say that there might not actually be a winner in that group that will make patient investors some money years down the road. That one stock will then be held up as example of why all of this always works out if you just hang on to it long enough.
“Real bubble-like markets” is what Laurence Fink, CEO of the world’s largest asset manager BlackRock called it today. He blamed the Fed. “It’s imperative that the Fed begins to taper,” he said. He referred to the “huge increase in the equity market,” with the S&P 500 soaring 25% so far this year while the economy languishes, while job creation is lousy and consumer spending feeble, while corporate revenue growth has trouble keeping up with inflation, and while earnings growth is stagnating. But if the Fed does taper, it will create a vicious downdraft for those folks who unwittingly ended up buying from the “smart sellers” at the peak of the market.
Brokers, financial advisors, and wealth managers are a recalcitrant bunch, suddenly, after having gotten their manicured fingers burned on a few super-hyped IPOs, and now they just refuse to get exuberant about the Twitter IPO. But individual investors, well, that’s another story. Read.... Twitter IPO A Dud? Yes, Says Survey of Financial Advisors (But You’ll Own It “Whether You Want It Or Not”)
http://www.testosteronepit.com/home/...ey-franti.html
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
Look Out Below: Home Sales Plunge: “Biggest Drop in 40 Months”
Last week the Sacramento Bee published a report indicating the foreclosure rates had returned to “normal” levels and that the, “foreclosure crisis that overwhelmed the greater Sacramento area for the past seven years has ended.” The Sacramento, California area was one of the hardest hit by the recession and foreclosures, with average home price declines reaching 50% in some areas.
If foreclosure rates were dropping, suggested analysts, it means that home sales must be rising again.
Except they didn’t.
According to a report from the National Association of Realtors home sales plunged significantly in the month of September. So much so that it is the single largest drop in signed home sales in 40 months.
Quote:
The National Association of Realtors said Monday that its seasonally adjusted pending home sales index dropped 5.6 percent last month from August to a reading of 101.6. That also pushed the index below its year-ago level, the first time that’s happened in nearly 2 ½ years.
There is generally a one- to two-month lag between a signed contract and a completed sale. The drop suggests final sales will decline in the coming months.
Via Sac Bee
…
The pending home sales data collapsed in September (and remember this is before the shutdown and was heralded at the time as buyers rushing to buy before the risk of the shutdown slowed acceptances). Affordability, argued by some serial extrapolators as still being ‘relatively’ positive – has drastically weighed on housing at the margin just as we argued previously.
This is the first annual drop in 29 months, the biggest drop in 40 months, and the biggest miss against expectations in 40 months.
Via Zero Hedge
Of course, the shutdown didn’t happened until the month after the drop, so there’s that.
Rising mortgage rates certainly play a role, and those rates only declined to begin with because of massive Fed monetary intervention.
In fact, the Federal Reserve has made so much money available, that many economists believe the debt party is back.
We are very closely approaching 2007 levels of personal and business debt. Likewise, we’re reaching new highs on stock market exchanges and home prices seemed to be recovering to boot.
But the real question is… how can we possibly be in a recovery when millions of Americans remain unemployed and underpaid?
How is it possible that home prices were rising and sales increasing while a record 107 million Americans received government distributions?
How can we be out of a recession when nearly 50 million Americans – fully 23 million households, or about 20% – are dependent on food stamps?
The answer is simple.
The entire economy is now a complete sham.
The CPI economic growth index indicates our economy is growing at a rate of about 2.5%. Simultaneously, however, the official rate of inflation is 2.5% (nearly 6% if we look at the real numbers). What this means is that not only is the economy not growing, we are actually in a growth decline of at least 3%.
By economists’ definition, a recession is a period of time in which we experience negative economic growth for two quarters. Given we’ve seen a real decline in economic growth for at least the last five years, does anyone still believe we’re out of the recession?
Or is it possible that we are in a greater depression that continues to chip away at Americans’ wealth?
When experts say we’re out of the recession because the economy is growing, it’s important to understand that the purported “growth” is simply inflation making it’s way into the system.
It’s the very same reason for why stock markets have once again reached record highs (none of these company’s earnings justify their outrageous stock prices!), and why home prices didn’t continue to collapse.
They injected the system, literally, with trillions of dollars to keep prices afloat and avoid a deflationary depression.
The consequence, however, will be continued inflation – likely hyperinflation – in years to come.
The only other option is to scale back the Fed’s monetary expansion – in which case we see a complete collapse in prices.
The bottom line is that all roads to true recovery will be extremely painful.
http://www.shtfplan.com/headline-new...ce=Patrick.net
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
But...but...but the teevee, newspapers and all the RE experts say that things are getting better and better. Surely they wouldn't not tell us the truth? <sarc>
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
Quote:
Originally Posted by
Libertytree
But...but...but the teevee, newspapers and all the RE experts say that things are getting better and better. Surely they wouldn't not tell us the truth? <sarc>
Why do you think we are called pee-ons?
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
Meanwhile the Chinese are buying and saying......"tank you Amelica tank you"..... only when ALL properties are sold will the prices really go down.
V
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
its going to be a fricken doozy when the music stops.
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
Quote:
Originally Posted by
Twisted Titan
its going to be a fricken doozy when the music stops.
the music already stopped, for a good percentage of the population.
but TPTB will keep on pretending, and calling vaporware products like "carbon sequestration" and "homeland security" as REAL products that count towards the GNP.
e.g. - DHS budget in 2011 was about $68 Billion.
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
confirms my suspicion that RE has a long way to go down, what happened since 2008 was nothing.
Re: Be warned! Smart Money Now exiting Real Estate - Beginning of the End
Quote:
Originally Posted by
mamboni
Starting at 10:35
"...and that's what happened in Weimar Germany and all the other places by the way. I've put it out there many times, the stock market in Germany went up huge, but the cost of living went up much more, and the price of gold and silver went up much much more...."
Katmandu comments: I have heard in multiple places around the net people saying things such as, "So what if the POG goes up to $[insert big number here] per ounce? That just means that a loaf of bread will be $[insert big number here]," or something like, "an ounce of gold has always been able to purchase one man's high quality suit".
I think there is surely a measure of truth to that, but in contrast I have always believed that a dramatic rise in the POG will supercede a corresponding rise in the price of goods. Whether it proceeds it by a few months or a few years is TBD. But what that means is that there will be a period where gold owners will be able to cash out some of their gold to purchase an extraordinary amount of goods. The video above is also alluding to this at the 10:35 mark. That point in time will be an opportune time to strategically beef up one's preps and other items. I know that several of us here at GSUS are also waiting for that opportune moment to purchase land/retreats, etc. Let's just hope that when that opportune time happens, that the shit has only partially hit the fan such that safe travel and other basic functions in life are still relatively easy to do.
