Capmark, once the commercial arm of GMAC (General Motors Acceptance Corporation), highlights the risk that the commercial property poses to the US economy.

KKR, the consortium that bought 75% of the GMAC commercial business, have already written the asset value down to nothing, according to the WSJ. Capmark is one of the larger players in the commercial property arena. GMAC, who were once a top ten lender in the UK specialising in sub-prime, put their mortgage business on hold in Sep 2008 due to the economic climate.

Capmark

They have quoted in court documents that “The unprecedented conditions in domestic and international financial markets have adversely affected Capmark’s business,” as well as blaming lack of available credit.

Many commercial lenders nave not downgraded their loan books in the hope that the recovery, when it comes, will rescue them. But the more drawn out the recovery, the more likelihood of defaults and therefore write-downs. Many commercial property outfits, such as Harry Macklowe and Tishman Speyer Properties LP are being adversely affected by plummeting values and an almost total lack of credit.

Some believe the write-downs could be around 15% in the final analysis. Not only would the writedowns apply to property, it would also equally apply to mortgage backed securities that pension funds etc hold. This would have severe repercussions on the markets, reversing the gains seen in the last few months.

This is not just a US phenomenon, earlier in the month research by the Forum of Private Business (FPB) showed that 77% of respondents to their survey reported that commercial lending conditions had worsened. This may cause businesses to fold putting further strain on UK commercial property prices.

------ Other articles of interest ------

• Economic Recovery and House Price Affordability
• Property millionaires take a pounding
• Blockbuster
• The West Country housing deficit

Tags: commercial property, economics, house price crash, housepricecrash, housing market, News, Politics, the markets

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