October 2009James M. Murphy CMB, CRI
Chairman Q10 Capital
How Did We Get Here?
So Where Are We?
What About The Capital Markets?
Where Are We going?
"Democracy is the worst form of government, except for all the other forms."
System Wide Failure
How Did This Start?
What Started This?
• Government Policy– Everyone should own a home!– HUD Sets Affordable Housing Goals– Federal Reserve Lowers Rates
• Fannie and Freddie Balloon Balance Sheets– $3.2 Trillion in debt – sold everywhere in the world
• OFHEO Undermanned and Under Funded– Campaign contributions buy elected officials
• Rating Agencies Fail to Do Their Jobs• Lenders and Wall Street Create New Products• Borrowers Take the Deal
So Where Are We Today?
"Nobody Knows the trouble I've seen. Grandpa can't pay the mortgage.”
Quote of the Year…
Employment Change in Thousands Top Ten and Bottom Ten States 2009
Importance of Education to Employment
If it’s about jobs, where are we in demand for basic property types?
Office
Retail
Industrial
Apartments
Completions and Absorptions by Property Type
Change In Asking Rents By Property Type Quarter to Quarter
Commercial Property Cap Rates
Office Market
Industrial Market
Retail Market
Retail Market
What About The Capital Markets?
Loan Portfolio ComparisonJune 30, 2009
CMBS Issuance
Originations by Investor Group
Total Debt Outstanding by Investor Group
Where Are We Going?
Non-Bank Maturities of Debt By Year
Commercial Banks and Thrift Maturities
Life Company Commercial Mortgage Maturities
Commercial Real Estate Compared To Other Assets
Yields for Comparative Asset Classes
National Office Market
12 Reasons for Optimism
1. A broad rally in stocks, confirmed and continuing into this week and led by the beaten-down financials.
2. A surprising surge in housing starts to a seasonally adjusted annual rate of 583,000 units.
3. A jump in retail sales led by autos, cash for clunkers
4. A return to profitability at several major banks, including Citigroup, Bank of America and JPMorgan.
5. A doubling in the obscure but important Baltic Dry Index, a key indicator of global trade flows.
6. An upwardly sloping yield curve, which Fed research suggests all but ensures a rebound by year-end.
7. A Housing Affordability Index that has hit an all-time high.
8. A two-month improvement in wholesale used-car prices, measured by the Manheim Index.
9. A rise in Monster's Employment Index in February, suggesting a turn in the job market may be around the corner.
10. A sharp increase in the money supply, as measured by M2 and M1. Weekly M2 growth has averaged 10.1% year-over-year since the start of 2009, while M1 has grown at a 14.6% rate.
11. A rally in the Index of Leading Indicators.
12. Data show nearly $14 trillion in liquidity on the sidelines of the markets, ready to boost consumer spending, credit growth or further stock market gains.
• “Never give in-• never, never, never,
never, in nothing great or small, large or petty,
• Never give in• except to convictions of
honour and good sense”
