bttmline

I'm in the business and yes a whole different world then residential, but if you understand finance and investing you will be fine. The biggest thing to keep in mind is that you really have to understand the local market and that just comes from experience and time. Commercial properties can sit vacant for years on one side of town and the other side be in high demand. Talk to local brokers, developers,owners, and understand all the players. I have a list of books for you to start with, but one of the better ones that I read and still think about is Professional Real Estate Development, Second Edition: The ULI Guide to Business. I'm happy to answer any questions.

It seems more and more apparent every day that israel is going to bomb Iranian nuclear sites. We already are seeing the spike in oil prices, but not seeing a lot of media coverage in US. I guess I'm not feeling a lot of market concern about this?

Here is the link for the reinsurance entity and holding company structure. Look at page7. http://www.searsholdings.com/invest/docs/Sears_Re_February_2012.pdf I'm trying to walk through this, but basically about $3 billion sits in the reinsurance co secured by notes to various assets. Does anyone know how debt has been issued by sears? Ie. has it been guaranteed by the individual operating entities or guaranteed at sears Holdings?

You have virtually no chance of talking directly with a REO person at bank unless it is a real small bank who doesn't really even have a workout group. I deal with the workout groups of many banks and they barely have time to call me back and they hired me. #1. They hear a statement like yours no less then a 1000 times a month #2 they have zero free time and completely overworked #3- you most likely will not get a better deal as the broker will try push through any valid deal. As suggested, you would be much better off talking/befriending a broker who works on many of these in your area. Also, just because it's REO it's not necessarily a good deal. A short sale or motivated seller could be a much better deal in many situations.

Yields are getting very interesting and trying to catch up on my research. Is anyone here taking positions and through which vehicle i.e Bond fund, etfs, or individual purchases? Listing of current yields on blackrock closed end funds http://www2.blackrock.com/US/individual-investors/performance-pricing/closed-end-funds I'd prefer to go with a respected manager, but just not versed in the bond world like equities. Any muni-bond manager with a long track record that someone could suggest to take a look at?

I agree with Myth. The REIT is simply a yield chase play by institutions. Not many options if you need current income. I wouldn't buy most of them now, but they are priced a little better now than they were a couple years ago in the peak when comparing to spreads over 10 yr Treas. BeerBaron: Valuation on REITs is all about Price to FFO (i.e Yield) or in private market Cap rates. Cap rates in private market have gone nuts over the last year and are back to 2006-07 levels for high quality assets. Class A properties in New York and Washington are trading in 5 Cap Range (Basically 5% unleveraged return or 20x earnings). So, basically the arbitrage between private and public isn't too much in most asset classes. The problem with book value on Reits is that its based on historical cost (In US). If they mostly bought in 80-90's then book value should be 2-3x cost. If they bought in 2004-2007 most likely should be < 1x book. Other reasons institutional buyers are back for REIT's: 1. Many have de-levered and extended maturities. Avg US Reit is less than 50% LTV where private market real estate is closer to 80% LTV. 2. Allocating to REIT's vs Private Equity Real Estate. No 2/20 fees and liquid. 2. Occupancy levels are down from say 90-95 % to 80-85% range. Some upside in releasing space. Of coarse there is downside if rents keep going down. 3. Many view as inflation hedge, especially in the apartment sector

Its funny, I just had a conversation with a mortgage broker the other day how its crazy that the interest rate isn't really much different on LTV. I had asked him to quote me on a loan for a primary residence with a 40% ltv and a secondary residence with 80% LTV. He told it didn't really matter LTV and rate ended up being almost identical.

Does anyone know how to get a list of Berkshire insured municipal bonds?

You can take a look at Wilmington Trust (WL) as the bad bank model. They are being acquired by M&T at large discount to book, based on the amount of bad loans. WT did everything wrong on the banking side. Over 20% of loan book were in construction and development loans, concentrated to a small geographic area, and had large single borrower concentrations. First thing I look at now in the small banks is what years did they grow their loan book, how large is their construction and development book, and do they have retail deposits to match loans.

http://etfdb.com/2010/powershares-deutsche-bank-team-up-on-3x-leveraged-bond-etfs/ Symbol: SBND I've been looking into this new product recently. I had owned the inverse TBT before, but you are subject to tracking error with daily ETF product. This is an exchange traded note which supposedly doesn't have the same tracking error. Maybe someone here has some experience here with them that they can share. I've also been looking at potentially shorting the JNK . This is the high yield index that has had a huge run up over the last year. Duration of this one is shorter at around 6-7 yrs though.

http://www.longleafpartners.com/pdfs/10_q3.pdf Trimming some positions that ran up this year, but still finding opportunities. They think they are about 60 P/V across funds.

Tariq, take a look at (BNCL) Beneficial Bank and tell me what you think. They did their 1st step in 2007 and have been sitting on excess capital since. They took a large write down for q3 but management is pretty conservative and think they were just being proactive. Stock took a huge hit when they announced the write downs a couple weeks ago and I added to my position. Earnings have been weak because of excess capital, but there should be acquisition opportunities over the next couple of years. There are many small banks in the Philadelphia region that won't be able to make it much longer.

do yourself a favor and print the transcripts from seekingalpha.com. Prob takes 5-10 minutes tops to read vs 45 minutes on a call. Over the last year or two I read a lot of them as it qives great insight into metrics on specific industries as mentioned. I agree with you guys that I really like focusing on the q&a.

I bought a small position earlier this year, but agree its a lot of work to understand and still won't have definite valuation. Basically, you have to look at the structures of their deals, management, etc, and feel comfortable with the general theme and terms. Its a similar to the trust involved investing in Luk or BRK. Personally, I like how they are run, the asset classes, and the ability to increase returns with asset management and incentive fees. It seems to me that every deal across asset classes they are targeting mid teen returns and capable of getting it. Mind you that when you are using partners money who's return expectations are sub 10% Brookfield with be left with large incentive distributions. I guess I'm a little more comfortable with the debt level on the real estate because for the most part lower leverage deals <60% and mostly on individual non-recourse basis. They made some mistakes in Brookfield Properties with the Trizec deal, but seems like they will end up okay on that now. Certainly, interest rate increases will have an affect, but depends on the debt terms. Many of the deals are done with 10 yr term.

I haven't had a chance to dig too much into the real estate side yet, but I can tell you as someone in the commercial real estate industry that it still has value. I have come across 2-3 leases in the last couple of months at $2-3 SF where market is closer to $10 SF with options with minimal or no increases for 50 yrs. Some of the big box tenants such as Kohls, Costo, other value retailers, etc are still doing deals if they are cheap. There will be a new retailer that will able to get a start based on some of these below market deals. Home Depot was able to really get started in the last recession due to a couple large retail bankruptcies. Also, as stated prior its not like they are going to have to market their whole portfolio today at distressed prices. They will have time to slowly wind down unprofitable stores.

I've looked into RAIT a couple times in the past and very difficult to value. They are/were a structured product company focused on the real estate industry. They relied purely on CDO's to finance their securitizations and would be interested to see how they are financing new deals other then paydowns from past portfolios. Good news is almost all of their financing was on a non-recourse basis and to the individual pools and typically retained the bottom equity for themselves. Part of the Cohen family of companies who are very smart and know how to make money, but most of their companies took a huge large hit because so focused on structured finance. You can get an idea of their other companies by taking a look at Resource America: REXI .

dcollon. Portion of it will be held at Fairholme and some in the Income Fund, but can't remember the proportion. Blackstone was advising/teaming up with Simon on the GGP deal and when the bankruptcy judge ruled for BAM/Fairholme/Pershing bid, they backed out on bidding. What the Wall Street Journal alluded to today is that BAM/Fairholme/Pershing played nice with Blackstone and offered 5% of the deal to them, so they wouldn't cause any more trouble. This makes sense to me considering BAM has an existing JV with Blackstone called US Office Fund under their US REIT BPO.

Boardwalk should prove to a pretty reliable cash flow generator over the next couple of years. If my memory is correct I think the average remaining lease term is about 7 yrs on their pipelines. I really like the company, but figured I buy it through loews at a discount and with the gp than at market. Anyways....I do agree with you guys, I'm looking forward to an acquisition on something non oil/gas related that's a reliable cash flow generator.

Below you will find a link to a spreadsheet I have put together for loews sum of parts analysis. The value assigned to Highmount ($1.75 b) is based on various numbers I've seen recently and not my own analysis. Let me know if this is helpful and any changes or mistakes I have in it. Thoughts on Valuation? Hotels Boardwalk GP http://spreadsheets.google.com/ccc?key=0ApYtMgkh8FHjdHNvVHZJUk51QjNzZ3doSkxjaTlweHc&hl=en

I've been watching Loews and invested in it for about 1 year. At one point within the last year they were trading at more than 40% to conservative book value and thats why Loews has been buying back shares. CNA took a beating last year that basically was inline with all the other insurance companies. There alternative investments are less than 5% of investment portfolio. They had Fannie or Fannie Preferred that went bad, but most of the other losses weren't a permanent loss of capital. Remember that Loews owns 90% of the common and a couple other large funds, so thats why CNA is not largely followed. As for evaluating detailed level insurance operating performance, I'm not the man and part of the reason I'm on the board to learn more on the insurance side. As for Loews, I wouldn't worry about the hotels as it is a small portion of book value. I have a spreadsheet that I can share with everyone when I get on my other computer that details the percentage of book value that each entity provides to Loews. I think its not strongly followed because the complexity of following three public entities and the couple private businesses.

Capmark was the former commercial mortgage arm of GMAC that was bought by a group of PE firms. News from today about Capmark/Berkshire and possible Chapter 11 http://www.bizjournals.com/philadelphia/stories/2009/08/31/daily41.html Notes from last filing: : On September 2, 2009, the Company and its wholly-owned subsidiaries, Capmark Finance Inc. and Capmark Capital Inc. (collectively, the “Sellers”), entered into an Asset Put Agreement (the “Agreement”) with Berkadia III, LLC (the “Purchaser”). The Purchaser is a newly formed entity owned by Berkshire Hathaway Inc. and Leucadia National Corporation. The Agreement provides for a put option (the “Put Option”) whereby the Sellers have the right to sell to the Purchaser the Sellers’ Mortgage Business and all assets primarily used in, or primarily related to, the Mortgage Business (collectively, the “Acquired Assets”). The Sellers paid the Purchaser $40.0 million in cash for the Put Option. http://www.capmark.com/CAPMARK/uploadedFiles/About_Us/Investor_Relations/Capmark%20Quarterly%20Report%20063009%20FINAL.pdf

The bleeding hasn't started yet on most of the private CRE owners. Rents and renewals just started falling about 6-9 months ago. Look for the next 2-3 quarters to be the test for some of the larger Reits as occupany goes from +/- 90% to low mid 80% and you will start to see the picture. CRE is so capital intensive that it becomes more about the financing then the underlying value sometimes. The pure size of some of the Reits and their debt rollover schedule were their biggest enemy. Here is a real simple example of the repricing going on right now. Cap rates going up 2% is over a 22% decline with rent staying even. Net Rent/ NOI: $100,000 $100,000 Cap Rate: 7.00% 9.00% Sale Price: $1,428,571 $1,111,111 -22.22%

I've been waiting for this to come out. Do you think it makes sense to invest right away or wait until they deploying money?