Why Your Nearby Mall Could Close

	Ian Cooper WealthDaily.com
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Well... it's better late than never. 

Sure, the Dow broke out, catapulting stocks from the summer doldrums...  but what those with short attention spans forgot is the other side of the “hurricane-like” storm wall... commercial real estate. 

Everyone's coming out, claiming there's an end to the recession... that we're having a “V” shaped recovery... but they're about to get walloped.

Yep, it's time to get out of the water, folks... and fast (just as Steve and I have been warning).

Heck, Bernanke... even Janet Yellen, president of the San Francisco Fed are nervous wrecks over it.

They know that $2.2 trillion of U.S. commercial properties bought or refinanced since 2004 are worth less than original prices.  They also know that prices have fallen so much that about $1.3 trillion of properties either lost down payments or are close to losing it.

And that just includes office, industrial, multi-family and retail properties.  Tack on hotels, and you can add billions more to the totals.

Without a doubt, this problem has emerged as the biggest threat to our economic rebound and banks (especially regional banks). 

Says Yellen: 

“The next area of significant vulnerability for the banking system, particularly for community and regional banks with real estate concentrations, is income-producing office, warehouse and retail commercial property," Yellen said.  “"Our biggest concern now is with maturing loans on depreciated commercial properties.”

“Borrowers seeking to refinance will be expected to provide additional equity and to have underwriting and pricing adjusted to reflect current market conditions,” she continued.  “In some cases, borrowers won't have the resources to refinance the loans.”

Over the next five months alone, troubled U.S. commercial real estate loans could double to $100 billion, as delinquencies rise and financing remains tough to secure. 

The next crisis that's just now in the first innings of a disaster is commercial real estate — a $6.7 trillion market supported by $3.5 trillion in debt.  And it's best to get out of its way now... with short positions for protection.

As this story unfolds, it'll read much like Part 2 of the residential market debacle.

And with values sinking, vacancies soaring, and a recession making it unlikely for us to see demand pick up, banks aren't exactly running out to refinance deals. 

Even Steve Christ will tell you that all of this is a recipe for disaster. . . and that industry leaders have estimated that 200,000 businesses and 10 percent of the nation's shopping malls will shut their doors over the next year. That means that we're maybe only in the second inning here as this crisis unfolds.

So, with roughly $530 billion in commercial mortgages coming due for refinancing in 2009-2011, and some estimates showing that as many as 68% of loans maturing during that time will FAIL TO QUALIFY for refinancing, you have to wonder how it will all get done, says Steve.

The brutal answer – it won't.

For more on this and the Option ARM "time bomb," click here.

P.S. In case you've missed any of the recent top stories from Wealth Daily and our sister publications, we've included them here:

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For eight years, he's avoided the herd mentality of Wall Street.

That would explain why he bought housing before the 2004 rise and shorted sub-prime and big housing names before the 2007 fall . . . all while the "experts" suggested doing the opposite.

In 1999, Ian left a job in public relations because he couldn't stand saying good things about companies he didn't like, and he's been a financial analyst ever since. His passion for Wall Street, technical analysis and the idea of fast money fueled the move.

Since then, Ian has written numerous articles on topics as diverse as trading news, mergers and acquisitions, crude oil, housing, and emerging market opportunities.

He's appeared in Investor's Business Daily and Forbes.com and has been a frequent guest on Money Matters with Barry Armstrong, Stock Dr. with Lee Seiler, and On the Money with Mike Stein.

Nowadays, Ian relies on technical and fundamental analysis for investment decisions, and has leveraged his options and stock trading passion to fuel his search for quick profits, which is just what you can expect him to deliver to his readership.