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 The carnage in the commercial real estate sector continued over the weekend as private equity-backed Capmark Financial Group Inc., a former unit of GMAC LLC, filed for a $21 billion bankruptcy. The distressed company had been racing to complete asset sales, a debt restructuring or a prepacked bankruptcy with creditors, which include Citigroup Inc. (NYSE:C), J.P. Morgan Chase & Co. (NYSE:JPM) and others, but ran out of time. (The Deal Pipeline subscribers can read more on those efforts here.)The Chapter 11 filing wipes out the investments of equity sponsors Kohlberg Kravis Roberts & Co., Goldman Sachs Group Inc.'s (NYSE:GS) private equity affiliate Goldman Sachs Capital Partners, Five Mile Capital Partners LLC and Dune Capital Management LP, who together paid $1.5 billion in cash and over $7 billion in debt for GMAC's commercial real estate business in 2006 and renamed it Capmark Financial. Beyond the bankruptcy filing, questions are arising about Capmark's wholly owned Capmark Bank, specifically around the real estate firm's decision to bolster the bank's capital with $490 million in cash and some $100 million in "servicing advances" earlier this month, just days before Capmark Financial consented to the entry of "cease and desist" orders effective immediately and imposing an 8% Tier 1 leverage ratio requirement on Capmark Bank, according to Zero Hedge. As for the rest of the commercial real estate market, trouble abounds. According to Trepp LLC, the delinquency rate rose 4.35% from 4.03% in August, while Realpoint pegged September's rate even higher at 4.15%, up from 3.47% in August. Commercial real estate valuations have been taking it on the chin for awhile now, falling over 35% since October 2007, according to Bloomberg. Over the next three years, about $1.5 trillion in commercial real estate loans are coming due, Walter J. Mix, a managing director at LECG LLC, recently wrote in The Deal magazine. Fearing a total implosion of commercial real estate could drag the economy back down with it, the Federal Reserve Board has been keeping an eye on the sector and recently extended its TALF program through June 30, 2010. The securities eligible for collateralizing TALF loans include newly issued, triple-A-rated asset-backed securities backed by loans to consumers and businesses, and newly issued and legacy triple-A-rated commercial-mortgage-backed securities. - George White Also see: Commercial RE webinar replay
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Trouble that is. We're ready for anything now, we've already experienced the worst what else is there to lose. Thanks for sharing. By the way, I know a real estate coach who could also help many in the real estate industry make money despite the current crisis.