Hungry for commercial real estate

Do you ever get in one of those moods where you really want to eat something in particular? You feel like you need to eat something specific and nothing else will satisfy your craving. Like, right now, I am craving a chocolate milkshake from the little ice cream shop near my home. Nothing else will be good enough, and if I try to substitute anything for that chocolate milkshake, I will surely be disappointed.

Incredibly, this does not only occur with food and drink. Sometimes you just feel the need to do something, anything. It could be as simple as walking down the street, or as intense as going sky diving for the first time.

Well, Wall Street is currently experiencing that hunger, they are feeling that need. But, unfortunately, it is not for skydiving. It just so happens that Wall Street is experiencing growing cravings for commercial real estate, which is evident through the interest of several large banks in real estate portfolios.

According to the Wall Street Journal, “Several banks, including Deutsche Bank AG (DB), Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC), are weighing bids for parts of nationalized Irish lender Anglo Irish Bank Corp.‘s U.S. real estate portfolio…”

“The interest in the bank's real estate loans, which have a face value of about $9.5 billion, is a sign of Wall Street's rising appetite for commercial property.”

If this is successful then chances are that other foreign banks will be looking to reduce their U.S. commercial real estate portfolios.  Property values in the U.S. have been on the rise in major cities over the past few months, which have attracted the attention of institutions that are seeking “higher returns in a low-interest-rate environment.”

The Anglo Irish portfolio offers banks the opportunity to get back into the commercial real estate game since debt in bigger cities is considered a safer bet. “The portfolio includes debt on some 250 properties, from New York City apartment buildings to a Beverly Hills shopping center to the Palmer House Hilton in Chicago.”

“Other banks such as Bank of America Corp. (BAC) and Citigroup Inc. (C) primarily are looking to finance bids by private-equity firms looking to buy pieces or the entire portfolio, according to people familiar with the matter. Those firms include Blackstone Group LP (BX), Starwood Capital Group, Centerbridge Capital Partners LLC and BlackRock Inc. (BLK)”

So, Wall Street is hungry for commercial real estate, and European banks might be willing to serve them. We will just have to wait and see what happens in two weeks, when all the bids for the portfolio are due.

What do you think about Wall Street's craving for commercial real estate?

Source article by Eliot Brown and Craig Karmin from the Wall Street Journal

#CRE #economy #finance