The FIG Factor in Hoboken RE

Few understand the intricate dependencies of the world of private equity and real estate funds. But one publicly traded name "seems" to be in dire straits as the stock price continues to plunge while the broader financial sector seems to be stabilizing.

In the area of real estate financing and ownership, no name stands out more prominently than the Fortress Investment Group (symbol: FIG). Some private and public entities, having established their beachheads in centers like Hoboken, are precariously balanced near an edge while tied at the hip to FIG.

How's that new office building at the southern foot of Washington Street coming along? We'll see...

Quiet Job Cuts Initially, Get Louder

Goldman Sachs Group Inc. is preparing to cut about 10% of its 32,500 employees, according to people familiar with the matter, a sign of deepening job losses on Wall Street.

The cuts, expected throughout the New York-based company, underscore how much even the mightiest securities firms have been shaken by the 16-month credit crisis. Despite avoiding the catastrophic mistakes that sank Bear Stearns Cos. and Lehman Brothers Holdings Inc., Goldman is suffering from the drought in investment banking and trading.

Goldman, which recently converted to a bank-holding company, has in recent months been less willing to put its capital on the line for both itself and its clients, which will result in lower profits going forward.

In September, with the company's work force at a record high, Chief Financial Officer David Viniar indicated he expected the company's head count to be flat or higher for the rest of the year. But the credit crisis has deepened since then, forcing Goldman to make the cuts.

The downsizing wave is likely to get worse on Wall Street in the next several months, from securities firms to hedge funds. Barclays PLC plans to cut at least 3,000 jobs from its payroll in the U.S., which includes former Lehman operations.

Of the 61,000 employees at Merrill Lynch & Co., thousands are likely to lose their jobs as part of the firm's looming takeover by Bank of America Corp. Merrill already has eliminated 5% of the its jobs this year.

About 75 Merrill staffers were cut this week from its Asian fixed-income and equities trading desks, according to people familiar with the situation. Those cuts were part of a world-wide staff reduction that eliminated about 500 trading jobs, a person close to the situation said.

At Morgan Stanley, employment as of the end of August was down about 3% from a year earlier to 46,383.

Reprinted from BusinessWeek: Necessary Q&A for the Hoboken RE Market

REAL ESTATE

Is a Short Sale Right for You?

Short sales are a big topic on BusinessWeek's Hot Property blog. Here are some blog-reader questions—and experts' answers

By Christopher Palmeri

"Short sales" are a big topic in real estate these days. The term comes from homeowners, looking to sell their properties in the slumping market, who ask lenders to forgive the difference between the sale price and what they owe. The National Association of Realtors estimates that 40% of all homes sold today are distressed situations—either short sales or foreclosures.

Lenders loath the practice. They'd rather change the terms of a loan than take a loss on it. Home buyers looking to snap up bargains are also likely to be disappointed, facing months of waiting as sellers negotiate with as many as three different lenders and the mortgage insurance company. The subject of short sales typically generates a tremendous amount of discussion on BusinessWeek's Hot Property real estate blog. Below, some questions from blog readers, answered by experts in the field.

Can an owner do a short sale on a house that has a first and second mortgage? Vicki, Sacramento

Yes, but this is one of the things that makes short sales so difficult—they involve negotiations between multiple parties. The lender of the second mortgage often has to agree to a total loss. Mortgage insurers and home equity lenders also can get involved. Sellers have to support their claim of financial hardship with bank statements, pay stubs, and evidence they actively marketed their home, says John Anderson, a Realtor in Crystal, Minn., who has done several short sales recently.

At the last minute the lender informed me that I will owe the difference. They are forcing me to agree to installment papers. Can they do that? Christiana, La Belle, Fla.

The bank has every right to ask for future payments, but the homeowner doesn't have to agree, says Jack Guttentag, a professor emeritus at the University of Pennsylvania's Wharton School of Business. He suggests telling the bank to go ahead and foreclose. "They are looking to avoid foreclosure expenses," Guttentag says.

I am looking to do a short sale with a company that negotiates for me, but I would have to pay them $700. Am I being scammed? Brenda, Bay Point, Calif.

Sellers do not need a negotiator, and there are questionable firms out there looking to profit from other people's distress. Homeowners who feel they need an intermediary should hire someone who takes a percentage of the sale from the bank or a minimal fee for paperwork. Alexander Paykin, chief executive of short sale negotiator Option Next, recommends working with a negotiator who is an attorney, so the homeowner knows the representative at least has a professional license to maintain.

Can I avoid paying taxes on the difference that I owe? Danny, Chicago

The Mortgage Forgiveness Debt Relief Act, passed in December, allows homeowners to avoid taxes on debt canceled on a primary residence. Taxes would still be owed if it is a second home or investment property.

Can the bank seize money in my savings account if I owe them money on the mortgage? Heather, Las Vegas

No.

How will a short sale affect my credit? Kristen, Mason, Ohio

A short sale will appear on a credit report as a settlement of the debt as opposed to reading "paid-in-full." That means the seller will receive a lower credit score and have to pay higher interest rates for borrowing down the loan, says Rod Griffin, director of public information for Experian, the credit bureau. Notice of the settlement will stay on the report for seven years from the initial default date, but the impact on the credit score will not be as severe as a foreclosure or bankruptcy.

I'm trying to buy a home in a short sale. How long should I wait before I can expect an answer? Calvin, Atlanta

The "short" in short sales does not apply to the time involved. Buyers must be willing to wait at least three months for approval. Trying to pressure a bank to respond by making the offer expire in 30 days or less likely will backfire. A buyer should write in the offer that deposit money is payable only on acceptance of the sale by the bank. Buyers can speed up the bank's decision by offering to pay with cash or by making an offer equal to at least 90% of what an independent broker figures the home is currently worth.

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau

This 1025MP Seller - Isn't!

Among the units available at poster child Maxwell Place, one seller stands out among those swept downstream on De-nial River. Only difference is that the Egyptians were much smarter without centuries of technology and research available to them.

Behold a 2 BR, 2.5 BA at 1025 MP covering 1430 sq feet on the 7th floor and facing Manhattan. This latter feature is one the owner seems to think very highly of - maybe too highly.

This unit has been listed for sale and for rent - whatever works for the owner in cash flow terms. As we have discussed, no such situation exists but this land mogul seems to think that what's good for Toll is good for them. They need to understand that Toll's opportunity is their misfortune before they lose it all!

The first postings for this unit were noticed around the beginning of May 2008 although it was closed/purchased a year earlier. It's fate during that time is unknown but I presume the owner must live in it by now, unless they have pockets so deep that it matters little.

The purchase price in May 2007 was $903,990 and the first listing in May 2008 was seen at $1,750,000. Has anyone noticed what the greed on Wall Street resulted in? This owner may represent the trend very well.

After a while, a rental rate of $6,999 was also listed for this unit in May 2008.

Hmm... okay no takers there either. What gives? A near 100% profit desired after purchasing at the top of the market should be a smooth go with that view! It's immuned to the rest of the world! (Now I'm getting really cynical).

Rent down to $6,900... Nyet!
Now rent down to $6,500... any guesses for the big prize?

On the selling price front, the original ask of $1.75 was shaven... down to $1.725... whoopee!
Then $1.69... ummh... what was it closed at in 2007?
How about $1.649? That's where we've been offered this unit below "developer pricing!"
I want to hear the explanation on that line!

Current property taxes are just under $13,500 and monthly condo maintenance fees are just over $800. I think we've discussed where both of these will be headed in the year or two ahead.

If anyone wants to start the counter-offer process here, please feel free.

Enough said... I hope I shame them into pulling it off the market.
After all, it always has been!

Don't Count On European Buying This Time

While US real estate markets might seem like a bargain, the relative reversal of conditions from just last year is startling.

While some foreign buying would still linger, it will not have any "investment" perspectives as in the past. And Hoboken being a beneficiary of any such spillover - is frankly a joke!

The euro and pound are crashing as deleveraging in the markets corrects the manias of the bubble. Furthermore, Europeans - just as in NY - are just beginning to feel the brunt of their own real estate pricing shocks.

That combination freezes investment flow EVERYWHERE. The only way out for us is a "domestic" correction whereby PRICES have to go back to TREND. As far as this town is concerned, we are a long way from home.

With all the good news I bear, let me add the wealth in stock investment portfolios that has been eradicated this year - especially this week. Even if you could afford to, are you about to buy a condo? If you are, you are one of those historians believing in a repeat of previous cycles - and you will be broke (to put it politely)!

This is a depression of MODERN proportions. So don't be a fool!

This post is directed at a RE broker friend who pondered a hidden solace for Hoboken's dilemma. It is a stretch at minimum, and a dream in REality.

Ask Prices Already Outdated By Print Time

The challenge in evaluating "comparables" rather than recent sales of comparable properties - is an exercise fraught with danger.

A major NJ real estate evaluator has been making that mistake in their "prolonged" call for a bottom in this regional market.

Unfortunately, they paid little attention to other more pressing circumstances regarding the region's economic pressures - property taxes included.

At last review (from a quarterly basis) we were into comparables priced at early 2005 prices. The stage is set for a deeper correction as naysayers begin to freeze up - literally.

I suspect that the implications of this damage will just BEGIN to be realized in 2009, as far as Hoboken is concerned.

Remember... the emotional stigma of the property investment defies the "investment" objectivity required in assessing the largest such activity for most households!

A Thousand Words

That's what this picture tells!

The issue on Hoboken's real estate market now becomes one of arrogance and bankruptcy or self-sustainability through capital preservation.

Either way, the natural forces now correcting themselves will not allow any opportunity for compromise or recovery - just as it should be.

We will move prices back towards "trend." How quickly that will happen will depend a great deal on who the smart exits are and who the bankrupt ostriches will be.

I've said it here before. This is a correction that has no comparison. It was apparent in the behavior of the land developers, through to the weak resellers. And while I can confidently leave Maxwell Place on the "dead in the water" list, there are some serious repercussions on this town as a whole.

One such issue is a very large private company by the name of Applied Companies, whose large and deep pockets have problems of their own. How that filters down is probably not far away.

It is a forecast that I don't wish to post here - and that should say enough. The property markets in this town have been fueled by a greed greater than Donald Trump, by a majority of amateurs who believe there is no downside over time.

They picked the wrong cycle to repeat history!

Devil Is Always In The Details - Spinning Numbers

Manhattan Apartment Sales Drop for Third Quarter

By Sharon L. Lynch

Oct. 3 (Bloomberg) -- Manhattan apartment sales fell for the third consecutive quarter and inventory rose by a third even as prices continued to extend a five-year streak of gains.

Third-quarter transactions fell 24 percent to 2,654 from a year earlier and the number of apartments on the market increased to 7,003, New York-based real estate appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report. The median price of a condominium and co-op jumped 7.4 percent to $928,263, the second highest on record.

Declining sales and rising inventory preceded lower home prices nationwide, spurring the nationwide housing recession. The city is bracing for a drop in property values after three of its five largest investment banks collapsed since March. Projected job losses in the financial industry rose to 64,000 in the metropolitan area, according to Moody's Economy.com.

``This crisis is so big and it's still sorting itself out,'' said Pamela Liebman, chief executive officer of the Corcoran Group, a Manhattan-based real estate brokerage that issued its own market report today. ``Until we get through the election and see what's going to happen with this bailout there are going to be buyers who sit on the sideline.''

The House of Representatives today approved a $700 billion financial-rescue bill meant to stem the bleeding by financial institutions that bought mortgages, packaged and resold them as securities during the five-year U.S. housing boom only to realize almost $590 billion in losses and asset writedowns as record foreclosures beset the country.

Federal Rescue

The legislation authorizes the government to buy troubled assets from financial institutions in hopes of freeing them to raise more capital and unclog credit markets. The House approved the measure today after voting it down Sept. 29, sending the Dow Jones Industrial Average down 778 points, or 7 percent.

The third-quarter Manhattan property market results are the first to capture sales since Bear Stearns & Co. was forced to sell itself to JPMorgan Chase & Co. in March after customers and lenders fled on speculation the company was short of cash.

``There is a clear understanding that the economy, and along with that the real estate market, is probably going to weaken before it gets stronger,'' said Jonathan Miller, president of Miller Samuel. ``But we are going into this weaker period with a fraction of the inventory overhang of a city like Miami.''

Rising Prices

New York buyers faced higher prices on all sizes of apartments: studios rose almost 9 percent to a median of $425,000; one-bedrooms climbed 5.5 percent to $727,000; two- bedrooms gained 11 percent to $1.5 million; three-bedrooms rose 3.9 percent to $3.8 million; and apartments with at least four bedrooms were up 56 percent to $10.2 million, Miller Samuel said. About 30 percent of the sales in the quarter were at new developments.

In the luxury market, defined as the top 10 percent of sales by price, the median increased just 1.8 percent from a year earlier to $4 million, according to Miller Samuel.

In the second quarter, the median luxury price rose 38 percent to $4.95 million, mostly because of closings at condominiums in the recently converted Plaza and at architect Robert A.M. Stern's 15 Central Park West, Manhattan's two most expensive new projects.

Tisch's Deal

Jonathan Tisch, co-chairman of Loews Corp., bought the most expensive apartment sold in the three months ended Sept. 30, paying $48 million for a co-op at 855 Fifth Ave., according to StreetEasy.com, a Web site that compiles listings from brokers.

Overall, the cost of condos climbed 8.9 percent to a median of $1.22 million. Co-ops, in which owners buy shares in a corporation that owns the building, rose 2.9 percent to $688,000.

New York City's residential real estate market is somewhat protected by financing rules set by co-op boards, which often require 20 percent down payments for even the smallest apartments, plus a cash cushion before they approve would-be buyers. The rules prevent speculators or people with poor credit histories from buying even if a bank would allow it, said Steve Malanga, a senior fellow at the Manhattan Institute.

Prices Fall

Two other price gauges published within the last week showed declines for the greater New York City area. The S&P/Case-Shiller home-price index for New York dropped 9.1 percent and Radar Logic Inc. reported prices per square foot fell 7.8 percent in July from a year earlier. Both measures include New York's five boroughs and surrounding suburban counties.

Brokers including Liebman said they are watching inventory. The number of apartments for sale at the end of the quarter rose 35 percent and was about 23 percent higher than the average over the last five years, Miller Samuel said. Corcoran put the number of unsold apartments at 10,761, the highest in eight years.

Corcoran, which uses research from PropertyShark.com to augment its data and is owned by Apollo Management LP, also reported a higher price increase. Corcoran captured 2,982 sales, representing a five-year low, and reported a jump in median price of 10 percent to $975,000.

Data from Manhattan-based brokers Brown Harris Stevens and Halstead Property LLC, owned by Terra Holdings LLC, showed a 12 percent price increase to $910,000.

`Softening' Market

``I think that we are seeing softening in some of the sectors of the market in terms of prices,'' said Gregory Heym, chief economist for Terra Holdings. ``It's not a huge decline. We've known that sales are slowing for some time.''

All the reports showed rising prices and inventory and a drop in the number of transactions. The numbers vary in part because each includes some of the company's own sales that have yet to show up in the city's public records database.

New York may not be headed for as big a plunge in property values as it saw in 1989-91 when a flood of rental buildings were converted into co-operatives just as Wall Street was struggling to recover from the 1987 stock market crash, Malanga said.

``The social fabric in the city is much stronger right now,'' he said. ``You don't have the fear factor. You don't have people wanting to leave.''

To contact the reporter on this story: Sharon L. Lynch in New York at sllynch@bloomberg.net

Last Updated: October 3, 2008 13:46 EDT

333 River St. Tenant In Wall Street Turmoil

The list of funds trapped in the Lehman morass keeps growing. London-based MKM Longboat Capital Advisors LLP said last week it will close its $1.5 billion Multi-Strategy fund in part because of assets stuck at Lehman, according to an investor letter.

LibertyView Capital Management Inc. of Hoboken, New Jersey, owned by Lehman's Neuberger Berman unit, told investors on Sept. 26 it had suspended ``until further notice'' attempts to calculate the value of its funds. LibertyView wasn't included in the Sept. 29 sale of Neuberger to Bain Capital LLC and Hellman & Friedman LLC.

Diamondback Capital Management LLC, a Stamford, Connecticut-based hedge fund, told investors that it had assets of $777 million stranded in Lehman. A spokesman declined to comment.

Toll Never Promised MP Owners A Profit - Did He?

Toll Bros CEO: Housing In 'Depression' But Will Rebound -CNBC

By Dawn Wotapka Of DOW JONES NEWSWIRES The housing market's downward spiral has reached "depression" levels but will eventually rebound, Toll Brothers Inc.'s (TOL) chief executive told CNBC on Thursday. Bob Toll, the luxury-home builder's outspoken chairman and CEO, also said that the home building sector's blood isn't yet running in the street. "It's starting to smell as though it's just around the corner," Toll said, adding that builders with cash will prosper, while "those that are on the edge are going to have severe trouble." The downturn has already forced dozens of companies out of business. Toll Brothers shares were down nearly 4%, compared with about 2.6% for the Dow Jones U.S. Home Construction Index. -Dawn Wotapka; Dow Jones Newswires