Chillin' out till it needs to be funded
While some banks have been packaging off properties for foreclosure to real estate developers and Professional REIT only funds have increasingly been relying on rentals as a source of income, data for it has hardly been available outside snips from Reuters and Bloomberg. However, of interest to the bureaucrats looking for a hope of recovery esp with the President’s re-election campaign this year; of interest to homeowners struggling with selling their home away even if it is underwater and of interest to banks that want to pay as per the settlement and revive their home loan/home equity business segments for rare profitability from traditional credit businesses, available in retail.
Dealbook discloses the new program aimed at retail homeowners in New York, Nevada and Arizona initially in the Mortgage to Lease program with the bank owning the properties and giving current owners to rent instead of keeping title to the property. The rent would be designed within the paying capacity of the homeowners to succeed while keeping in mind the market rates for rentals in the area.
The Bank has already agreed to bigger Principal cuts on the 1 mln mortgages it owns and the rental program will also apply to its own mrtgages. Another 8 mln mortgages from the lender are owned by Fannie Mae and Freddie Mac
Distressed Sales form one third of Existing home sales on average in the last six months and Institutional Investors have been waiting for opportunities with the housing market at an all time low. Private Equity globally has been looking at the Real estate market with renewed interest with the sovereign bonds crisis hopefully abated for a few months and Portugal an dSpain not ready to upset the apple-cart for a few extra dollars of deficit.
Meanwhile the bank has been guilty of selling off its myriad buildings and a $1 bln stake in US holdings including a Blackstone commercial REIT to Credit Suisse. Some of its own PE funds are now independent funds incl Ridgemont and North Cove. Local economies in the South East and in the Midwest could be more dependent ont he bank than its Financials prove as evidence d by the reaction to the Bank foreclosing on its 55 storey BofA tower in Atlanta that went to a forced public auction and the 37 storey building at 100 Federal Street in Boston to Boston Properties for $600 mln the next week that came to the bank with the Fleet acquisition in 2004. Earlier in March it announced an auction in Charlotte for the Hearst Towers and the Fifth Third Center
The tower at One Bryant Park in New York is of recent vintage built in 2004, a 52 story marvel in mid town Manhattan, which in itself is only half owned by BofA and it leases the tower for the bank including its four trading floors to manage the cash flows.
The 333 South Hope Plaza at 55 stories, acquired from a local West Coast Bank in Los Angeles, the Field Building completed in 1929 at 135 So LaSalle Street in Chicago (230 So Clark) at 45 stories and One Bryant Park though are not advertised on the Chopping blocks yet. The New York, LA and Chicago assets look likely to remain with the bank.
Dallas Center was advertised for sale last year bbefore the deal for MBNA cards with TD, The Dallas Main Center with 72 stories on Main Street completed in 1983 is owned by Metropolis and BofA leased th ebuilding as a major tenant.
Skyscrapers in Houston and other cities are not owned by the bank either.
Apart from Residential REITs, Institutional Buying has also been reported in REITs like the Senior Housing Properties(SNH:US) and the Healthcare REIT(HCN:US) or Douglas Emmett, BioMed and Equity