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Nevada ranks third in rate of delinquent commercial loans
Moody’s says situation could get worse before getting better
Steve Marcus / File photo
A view of the Village Square shopping center at Sahara Avenue and Fort Apache Road in 2008.
Wednesday, Oct. 14, 2009 | 2:42 p.m.
Sun Coverage
The recession continues to pound Nevada's commercial real estate industry, with the state ranking third in a new report on delinquencies involving mortgage backed securities.
Moody's Investors Service reported Tuesday that the delinquency rate on such loans nationwide hit 3.64 percent in September, up from just 0.54 percent one year ago.
Arizona, Michigan and Nevada led the nation with delinquency rates in September of 9.32 percent, 9.29 percent and 9.14 percent, respectively, Moody's said.
"After tapering off for two months, the delinquency tracker appears to have resumed an upward trend as expected," Moody's Managing Director Nick Levidy said in a statement. "The delinquency rate is likely to continue moving higher over the next several months as troubles compound in the commercial real estate sector."
The report is in line with third-quarter numbers released Oct. 1 for Southern Nevada by Colliers International--Las Vegas reflecting the deepest local recession in memory:
--Industrial vacancy hit 13.3 percent, a 0.9-point (or 7.5 percent) increase from one quarter ago, and a 3.4-point (or 34.7 percent) increase from one year ago
--Office vacancy climbed to 22 percent, a 0.2-point (or 0.8 percent) increase from one quarter ago, and a 4-point (or 22.2 percent) increase from one year ago.
--Retail vacancy reached 8.6 percent, a 0.5-point (or 5.8 percent) increase from one quarter ago, and a 3-point (or 52.8 percent) increase from one year ago.
Illustrating the problem locally, loans backing three more developments in Las Vegas were moved by Fitch Ratings into the troubled category in recent weeks.
Debt-rating companies such as Fitch, Moody's and Standard & Poor's monitor commercial and multi-family residential loans that have been collateralized and sold as securities on Wall Street.
In recent weeks Fitch reported on issues with these loans:
--Losses are expected on a $59.68 million loan syndicated by Morgan Stanley and backed by the Village Square shopping center and office development at Sahara Avenue and Fort Apache Road, Fitch Ratings said Oct. 2. As of June, occupancy had declined to 63 percent in the office component and to 51 percent of the retail component. The loan for the 238,000-square-foot development was transferred to special servicing in February after the owner, Triple Five Nevada Development Co., indicated it would be unable to meet debt service obligations, Fitch said. "The special servicer continues to follow a dual-track workout, which considers a possible (loan) modification or foreclosure,'' Fitch said. The property was 94.5 percent leased when the loan was issued in 2007, records show.
Also commenting on the Village Square loan was Dominion Bond Rating Service, which on Oct. 7 said a March appraisal valued the property at $38.5 million, down 48 percent in two years. "DBRS is assuming that a significant principal loss will be incurred,'' Dominion said in its report.
Real Capital Analytics earlier reported Triple Five had defaulted on a $27.6 million loan for its planned Great Mall of Las Vegas, which has been shelved because of the recession.
--Losses are also expected on a $15.54 million loan syndicated by Citigroup in 2006 and backed by the 116,000-square-foot Desert Inn Office Center, on Desert Inn Road east of Eastern Avenue. "The property has lost several tenants over the last two years and the vacant space has not been re-leased,'' Fitch said in its report Oct. 2.
With occupancy dipping to 69 percent at year-end, the loan was transferred to special servicing in March 2009 and the special servicer is pursuing foreclosure, Fitch said.
The property is owned by Western America Equities LLC of Issaquah, Wash.
Officials with Triple Five and Western America could not be reached for comment Wednesday on the status of their projects.
--Fitch Ratings on Sept. 30 placed several Bear Stearns real-estate backed securities on "rating watch negative'' after, according to Fitch, a loan for the downtown World Market Center Las Vegas furniture industry showcase was placed into special servicing in September, along with five unrelated smaller loans.
Loans are typically placed into special servicing when they are in default or headed toward default -- but the World Market Center said Wednesday it's not in default on its debt.
Records indicate the property received a $225 million refinancing loan in 2005. Fitch said the special servicer has reported occupancy fell to 88 percent at year-end 2008 -- and that the center's ability to service its debt has declined.
The Market Center on Wednesday declined to discuss current occupancy statistics for competitive reasons.
"World Market Center's debt is part of a much larger pool of collateralized mortgage backed securities (CMBS) that are traded in secondary markets amongst investors and bond traders. CMBS pools are frequently rated by the rating agencies based on their technical analysis of the pool as a whole, and such actions have no impact on World Market Center, nor does it affect Las Vegas Market and its operations. World Market Center's debt is not delinquent," Bob Maricich, chief |executive of World Market Center Las Vegas, said in a statement.
World Market Center now stands at more than 5 million square feet of space across three buildings, and says it exceeds the size of any trade merchandise mart in the United States. Under build-out plans, the complex would be valued at $3 billion with 12 million square feet and eight buildings, which would make it the largest trade show complex in the world.
The World Market Center was developed by New York-based Related Companies and partners Shawn Samson and Jack Kashani.
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and it is only the beginning..The second wave...its in all states - not just Nevada, CA and others...we have a long way to get out of this depression and it wil lbe at least 7 years...what has happened to America? And DON'T blame Bush...he didnt sign all the mortgages, etc...
One housing complex in New York City is going to shock the banks and pension funds across the nation as in defaults on Billions where there is now NO equity. Round two of this economy fall is about to hit hard.
http://online.wsj.com/article/SB12554782...
The recession is led by 15 years of faux money in the housing marketplace, and not enough money in the industrial goods marketplace. Job loss overseas is another reason the previously- mentioned ailing marketplaces are in deep stuff.
On the positive side, it seems that Criss Angel is taking a break from 'Believe'. Thank god. Anyone? Anyone?
dont ever depend on someone else to take care of your money and finances.
Perhaps Obama can get the Nobel Economics Prize next year! What would even be better would for the University of Stockhohm to offer him their Presidency.
the only people saying the recession is over are the ones that have jobs.
they take one piece of data that is positive and then "BOOM! recession = done."
doesn't work like that.
it's getting WORSE in nevada...not better.
i think that 8% vacancy retail number is wrong. it has to be higher than that. there's just so many empty storefronts. i think it's got to be closer to 25%.
The only reason it's not doing worse is that the Federal Reserve (what a name..and not Federal) has basically created billions and trillions of dollars with a few well placed keystrokes on their internal computer system keyboard, and essentially in doing so, then, has covered all this pathetic bad debt with a nearly blank check of imaginary greenbacks. Not to mention that all these imaginary computerized greenbacks are now gonna blister our currency standing in the world. (Checked into the Euro, lately, or why the Chinese want the greenback tossed overboard?)
The seeds of all this bad debt (really, just bad gamblin') were planted years ago, right under your nose, by the major real estate and financial players getting into bed with the elected political types, and then doin' the dirty just about anywhere and anytime they pleased (including here).
They all knew this train wreck was comin'. And they all knew their political pals would bail 'em out.
California, Arizona, Nevada, New York, South Florida etc., all had elected (and some not elected) political players regularly splittin' the sheets with the all money and real estate people (and not in cheap flea-bags, either).
So.. what a loser's cesspool of dirty sheets and laundry we got on our hands now. And, of course, we have to pay for the soap ourselves and clean up the filthy stained satin and linen by hand, while the useless j'mokes that done it all, run away scott-free for a day at the beach.
So, then, why is the stock market doin' so good today when we're all doin' so bad? Simple. Ruthless, uninhibited, step-on-your-neck capitalism. Every day thousands of brokers are calling hundreds of thousands of so-called investors, and blowin' hot air through the phone on how the rubes, as the say in the business, are missin' it. Profits? Easy. Corporations cuts costs. You know this as employees. They know it as mid-line expenditures. And the corporations will keep cutting until they meet or exceed, what's known in the business, as the analysts profit expectations. Why? Because the corporation's officers want to keep their jobs. Yours don't matter, theirs do. And they have the power to do it and keep it that way. Simple.
If you really want to know where the next economic round is coming from, try this. Take a peek at exactly what that CEO's job was, before he was a CEO. There's a better than even chance, lately, that this CEO was a CFO (in common parlance, a chief accountant) and, as CEO, is really just a super-duper penny-pinching decimal-point pencil-sharpin' chief song and dance artist. Short on ideas, long on spreadsheets.
And that's really a function of our deeply-globally-oriented major business schools, and their espoused ethos of brutal free-market capitalism. In essence, they teach money should flow where it does the most (profitable) good, (but only for the one's that control the valves and adjust the flow).
And that's not gonna be me and you. See ya' at the Chapter 7.
i notice the residential foreclosures have just jumped to the worst of all time!!
stevem
Questions for you..
why do you change you stance on every article?
Are you a bear or a bull for the property market?
As you can't be both!!
There's a little shopping center on Lake Mead Parkway in Henderson. It is without a doubt the best looking center I have ever seen. Maybe 15 stores, clean and ready for occupancy. Empty, totally. Across the street is a 2 year old sign for the new Smith's supermarket. It's falling down now. Up the street is Lake Las Vegas, a total joke. The place is deserted day and night. Except for Bouvier, wandering the streets like the the H back of Notre Dame. Really sad, he's a good guy in a bad world....
I'd say that the retail vacancy rate in Vegas is around 33 1/3%. Same for Henderson. If you want to see a brand new strip mall office complex that is 100% vacant in Henderson, go to the southeast corner of Horizon Ridge Parkway and Green Valley Parkway, adjacent to the CVS pharmacy on the corner. Stone cold vacant!
The commercial real estate phase of this depression is really going to blow people's minds country wide! this is just the tip of the iceberg, this is also precisely why City Center is going to go down for the count very quickly. Get ready folks!
As far as positive economic news, there is none. The news media spins it as positive. The way it works is some company reports dismal sales and profits but since it beat even more dismal analysts estimates, it's a positive. For instance one headline recently claimed consumers went on a spending spree in September. Not really. Sales only beat the lowered expectations. Same with Intels "hitting it out of the park" results. People are still getting canned but since the rate is declining it's a positive even though the number of unemployed keep going up. It pays to read beyond the headlines. Unless of course you are easily depressed by bad news.
I wonder what the news headlines will be 10 years from now.......
This is the 3rd JOBLESS economic recovery since 1980-when Reagonomics allowed the start of the destruction of the middle class. (Remember trickle done?) What is really going on is corporations are just firing people to make more profit.
Manufacturing has been moved to China for less than $1 per hour. Nobody can compete with this.
The US has been taken over by corporations.
Funny thing, Abraham Lincoln warned us about this over 100 years ago.
A number of businesses that had SOCAL and Vegas commercial locations have closed the Vegas location and moved back to SOCAL, keeping that site.
I thought the Republican line was low taxes and republicans equal jobs and prosperity? Nevada has the second lowest taxes next to Alaska and the second highest unemployment next to Michigan. And we have a Republican Governor.
So the Limpbows and Sean Inssanity's of this world must be back on the meds?