Daily Archives: March 3, 2009

Tales from New York

Prices falling, sales falling, inventory up in New York City and the Hamptons.

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But don’t worry – the bankers made money

Morgan Stanley to write off 60% of value of its $8.8 billion real estate fund.

MSREF and other “opportunity funds” were among the many tantalizing investments sold by Wall Street to large institutions over the past five years. Opportunity funds are different from other real-estate funds in that they make extra use of borrowed money for purchases, sometimes more than 70% of the value of the properties, compared with about 50% for more traditional real-estate investments. The leverage makes it easier to produce higher profits if values rise. But if they fall, the decline can quickly wipe out equity.

For the fund managers, there was another benefit: Opportunity funds rewarded them with high fees and a cut of any increase in asset value. Across Wall Street, the value of the assets held by opportunity funds jumped from $134 billion at the end of 2005 to $280 billion at the end of 2007. Many of the buildings in the funds are now worth less than their mortgages. Even worse, some of them are no longer producing enough cash flow to service their debts, meaning the funds have to invest more or face foreclosure. Industry experts say write-downs in excess of 50% for 2008 will be typical.

And there’s this:

The appearance of dismal returns shows how steep losses sustained by the commercial real-estate industry are being absorbed by retired teachers, policemen and other beneficiaries of the institutions that were chasing the funds’ high returns. The looming losses will likely increase the pressure for higher taxes to shore up government-employee pensions and more cutbacks at universities and foundations.

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Happy News from Canada

It’s all in the headlines. This one says, “home sales warming” and you are not to be discouraged by the rest of the article, which admits that new homes have taken a dive to the bottom and existing home sales are off 40%. “Well yeah, but the beginning of last year was exceptionally strong”, explains a local real estate flack. I see.

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How come Greenwich doesn’t have exotic real estate agents like this?

Dutch agent shot to death in car.

Real estate agent Peter Petersen has been shot to death in his car in the Dutch town of Bussum. It is not known who is responsible for the killing. Police later found a burned-out car in the town of Almere-Buiten.

Peterson, also known as Fat Peter, had business connections with Kees Houtman, a real estate agent who was shot to death in his home in 2005. Both Petersen and Houtman were allegedly blackmailed by Willem Holleeder, who is imprisoned and on trial for the extortion of various real estate magnates. Petersen’s name also appears in police files concerning an investigation into money laundering by real estate magnate Willem Endstra, who was shot to death near his car in 2004.

“Fat Peter”? Cool! All we get around here are the occasional drunk drivers and rowdy shoppers. Those Dutch!


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I suspect he’ll like the French better

Obama snubs our only ally, Britain.

Suggestions that the new President’s crowded diary made it impossible to give more time to Mr Brown rang hollow after it emerged that his other engagements included a routine speech to the Department for Interior and a meeting with the Boy Scouts of America. 


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Here’s an idea Wall Street’s already thought of

From The Virginian:

Wall Street Economics

Young Chuck moved to Texas and bought a donkey from a farmer for $100. 
The farmer agreed to deliver the donkey the next day. 
The next day the farmer drove up and said, ‘Sorry Chuck, but I have some bad news, the donkey died.’ 
Chuck replied, ‘Well, then just give me my money back.’ 
The farmer said, ‘Can’t do that. I went and spent it already.’ 
Chuck said, ‘OK, then, just bring me the dead donkey.’ 
The farmer asked, ‘What ya gonna do with a dead donkey? 
Chuck said, ‘I’m going to raffle him off.’ 
The farmer said ‘You can’t raffle off a dead donkey!’ 
Chuck said, ‘Sure I can. Watch me. I just won’t tell anybody he’s dead.’ 
A month later, the farmer met up with Chuck and asked, ‘What happened with that dead donkey?’ 
Chuck said, ‘I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.’ 
The farmer said, ‘Didn’t anyone complain?’ 
Chuck said, ‘Just the guy who won. So I gave him his two dollars back.’ 
Chuck now works for Morgan Stanley in their OTC Default Derivative Department.


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We get the government we deserve, unfortunately

Obama surges in polls, Republicans get stomped. The Republicans should get stomped, of course.


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