10-Q Season
Most of the second quarter 10-Qs are now available and I am just starting to read them. The Behringer Harvard Mulitfamily REIT 10-Q does nothing to allay my concerns. I will write more on this REIT later, but this 10-Q is worth reading if you have any interest in this investment. It is no where close to covering its distribution, and its positive cash flow item is a one-line figure from the REIT's various joint ventures. There is no detail and given the nature of the REIT's investments - mezzanine loans with equity conversions on development projects - I think this is an important data point.

Bernanke Re-Upped
Ben Bernanke is nominated for a second term as Fed Chairman. I think this is an excellent decision. You can say he was late to recognize the housing bubble and slow to respond to the financial crisis. But it would be hard to say that once he realized the depth and seriousness of the crisis, he did not act in an excellent manner. (There are other people that need credit, too, including former and current Treasury Secretaries Paulson and Geithner.) Bernanke's roll in solving the crisis will figure prominently when the history is finally written. His calm, financial acumen, historical perspective and respect in economic, financial and political circles helped stave off worst case scenarios.

Retail Cap Rates
I just saw this post on Calculated Risk. Cap rates for retail real estate are now above 8%. This figure is expected to rise in the the third quarter of 2009. The Calculated Risk post has a graph of cap rates since 2003. In looking at the graph, it looks like cap rates have jumped nearly 100 bps since late 2007.

Condo Conversion Disaster - Vegas Style
Here is a link to a Calculated Risk post on a condo conversion gone bad in Las Vegas. Here is a quote from the blog that is quoting an article in the Las Vegas Sun:

The property, which had a failed attempt at trying to convert into a condo-hotel because of Clark County regulations, sold for $604 per square foot when it first entered the market. The average price was $539,000, Murphy said.

Through June, the average resale price has fallen to $87,611 or $121 a square foot, Murphy said. With that drop in price has come rising foreclosures. Murphy reports that 201 of the 680 units or 30 percent have been foreclosed upon, and that number is likely to rise. The foreclosures have been running as high as 25 a month so far in 2009, he said.

At the middle of all this is Corus Bank, the condo lending king that will soon be a pauper.

Looking for the Half-Empty Glass
Here is the Bloomberg article on today's employment figures. I can't see anything bad in the numbers, and have not heard any naysayers, either.

DBSI Bankruptcy News
I was sent this link on DBSI. I would not be surprised to see some jail time for some DBSI principals. Here is an interesting couple of paragraphs from the article:

Earlier this year, the Idaho Department of Finance filed a lawsuit accusing DBSI of defrauding investors with a Ponzi scheme. The state also asked the bankruptcy judge to appoint a team of lawyers and forensic accountants to study the company's accounting records.

The judge named Joshua Hochberg to lead that investigation. Hochberg, a former Department of Justice attorney, filed his preliminary report with the court Tuesday. Some of the preliminary conclusions include accounting irregularities, questionable appraisals used to support bond programs, and improper use of loans made to DBSI, according to the report.

The bold and italics are mine. Sponsors issuing debentures are never a good idea, and this information seems to prove that point.

New Favorite Financial Blog
I am lacking on good financial blogs. I heard of this blog, Calculated Risk, last week and find it very informative. It has plenty of good commercial real estate posts along with good economic commentary, plus it's updated several times a day. I will likely quote it and link to it on a frequent basis.

Reading Between the Lines
Dividend Capital Total Realty Trust released an 8-K on Monday stating that it is closing its offering period on September 30th, about four months early. The REIT has too much cash ($540 million) and can't find enough property. Here is the key takeaway:

As of July 31, 2009, we held cash and cash equivalents in excess of $540 million. We believe that this strong cash balance is critical in the current market and positions us well to take advantage of investment opportunities in the future. However, severe market dislocation and current dysfunction in the credit markets has resulted in historically low commercial real estate transaction volume. As a result, opportunities to deploy our capital have not been as quick to emerge. In addition, and in light of market conditions, we have attempted to be prudent in the deployment of capital, which also has resulted in a slower pace of investments. In the meantime, our cash balance has a significant dilutive effect on our goal of funding the payment of quarterly distributions to you entirely from our operations over time.

I added the italics. I read that last sentence as a set-up for a distribution cut in the near future.