# The ongoing CRE collapse in the US



## james_57 (Jul 5, 2010)

Are there any commercial RE people here?

I've been following the CRE situ in the US for awhile, wondering when the fallout is going to impact. I just found this interesting tidbit. I wonder how much exposure Canadian banks have in the US. 

Here's Why Commercial Real Estate Hasn't (Yet) Been A Disaster -- But Probably Will Be 

_'Banks hold some $176 billion of souring commercial-real-estate loans, according to an estimate by research firm Foresight Analytics. *About two-thirds of bank commercial real-estate loans maturing between now and 2014 are underwater*, meaning the property is worth less than the loan on it, Foresight data show. U.S. commercial-real-estate values remain 42% below their October 2007 peak and only slightly above the low they hit in October 2009, according to Moody's Investors Service. '_


----------



## GeniusBoy27 (Jun 11, 2010)

I doubt that's happening in Canada for 2 reasons. One, the property values have dropped significant in the commercial RE market. If anything, the low interest rates have increased the value of commercial RE in the big cities (at least, Toronto).

Secondary, the exposure risk with the 35-40% requirement is relatively low. 

I just don't see it as a problem here in Canada.


----------



## james_57 (Jul 5, 2010)

GeniusBoy27 said:


> I doubt that's happening in Canada for 2 reasons. One, the property values have dropped significant in the commercial RE market. If anything, the low interest rates have increased the value of commercial RE in the big cities (at least, Toronto).
> 
> Secondary, the exposure risk with the 35-40% requirement is relatively low.
> 
> I just don't see it as a problem here in Canada.



The question was not related to Canadian Commercial RE (different kettle of fish), rather, was about Canadian banks exposed in US sector. (i just edited the question to be more clear, sorry about that)


----------



## james_57 (Jul 5, 2010)

66% percent of all commercial loans which mature in the next 5 years ARE UNDERWATER... its an incredible statistic. 10% would set of alarm bells in any economic zone. I can't quite fathom the asset destruction that awaits.. and tax revenue losses? Wow.. this 'extend and pretend' phase is going to go on for years.. they are going to need to re-write accounting standards to get by this one.


----------



## Cal (Jun 17, 2009)

I don't think the CDN banks are exposed too much to the US Com RE markets at all. They do operate some banks and such down there. But I do believe that CIBC and the US CIBC Mellon and Mellon Banks are different entities.

Also, not sure why a US Com RE company would need to deal with a CDN bank when the US banks were lending their brains out anyways.


----------



## james_57 (Jul 5, 2010)

Cal said:


> I don't think the CDN banks are exposed too much to the US Com RE markets at all. They do operate some banks and such down there. But I do believe that CIBC and the US CIBC Mellon and Mellon Banks are different entities.
> 
> Also, not sure why a US Com RE company would need to deal with a CDN bank when the US banks were lending their brains out anyways.


RBC for example has been investing heavily in the US recently, but no idea what sectors they have been investing in or lending into. 

_
Jan 5 (Reuters) - Royal Bank of Canada (RY.TO), in a sustained drive to expand in the United States, said on Tuesday it has changed the name of its U.S. asset management business to RBC Global Asset Management (U.S.).
RBC Global Asset Management (GAM) comprises the three asset management firms owned by Royal Bank of Canada: RBC GAM (U.S.), RBC Asset Management Inc, and Phillips, Hager & North Investment Management Ltd. It had combined assets of more than $200 billion as of Oct. 31 in the United States and Canada._


----------



## GeniusBoy27 (Jun 11, 2010)

Oh, that's an entirely different question. I think the Canadian banks are exposed to the US commercial RE market, so there's the potential for a big hit. But overall, it's a small portion of their portfolio, and I think they can easily absorb the losses. 

I could get onto things about bank profit margins, which are ridiculous ... a guarantee 2% over prime (that is bank prime-Bank of Canada prime?) Give me a free 2%, on a few trillion, and ummm you get tens of billions of dollars with 0 risk. Hmmm ...


----------

