Investors looking for a play on the commercial real estate market but don’t have the stomach for defaults and declining property values may have an interesting alternative on the horizon. The company is Velocity Commercial Capital and it filed to go public late last week. It’s relatively small but that’s what makes it attractive.
The company originates or buys small business commercial real estate loans. All are first lein. And the largest loan it will get involved with is $3 million. The average loan value in its portfolio is $391,000.
Posted by Rick Stine
on February 26, 2010
Here’s a staggering statistic mentioned in Fannie Mae’s just released financial results – nearly 1 out of every four residential properties in the U.S. (24%) today has negative equity because the value of the homes are less than the mortgages against them. What that likely means is any rebound in housing prices will be slow at best. If homeowners with negative equity wal away from their obligations, forced home sales will tilt the supply-demand balance of homes in favor of supply, as in too much of it. Thus the continued pressure on housing prices.
And of course this isn’t good news for a company that holds a lot of these mortgages. Fannie Mae reported a 4Q loss of $16.3 billion, an improvement over the loss of $19.8 billion a year ago. Things are so bad at Fannie that it asked for an additional $15 billion from the Treasury just a few weeks ago. All of this comes on the same day that another government-owned company, AIG, posted staggering losses as well.
How bad is the outlook for Fannie? It says in its filing that it can’t be certain about its long-term sustainability (in other words, it may not be around.) And it says that the dividend payments it will have to start paying the Treasury for giving it money (via preferred stock investments) will be so large that the company will have to borrow from the Treasury to pay the Treasury those dividends. The question isn’t what the long-term sustainability of Fannie Mae is but how long can the Treasury sustain a situation like this.