tag:blogger.com,1999:blog-1527840491496268397.post7237742068961268210..comments2007-06-06T18:12:49.418-07:00CPnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-1527840491496268397.post-66908046831912611982007-06-06T18:12:00.000-07:002007-06-06T18:12:00.000-07:002007-06-06T18:12:00.000-07:00According to the Q:<BR/>"our initial loan exposures target approximately 55% to 65% of sellout"<BR/><BR/>WCI's gross margins were 23% in 2004, 24% in 2005, and 12% in 2006.<BR/><BR/>So if that 60% of sellout number was based on fanciful sellout prices from 2005 or 2006, their loans are<BR/><BR/>0.6/(1-0.235) = 78% of gross cost.<BR/><BR/>Also: that's the "initial" loan exposure. Do they mean that the developers can draw more than that?<BR/><BR/>This is really irrelevant to Matt's point about sale to a REIT. <BR/><BR/>Take a look at craigslist to see what Miami condos are renting for.<BR/>$2500/mo?<BR/><BR/>Cap rate of 5% values them at:<BR/><BR/>(2500*12*60%profitmargin)/(.05)=<BR/>$360,000<BR/><BR/>Unfortunately, CORS is into many of the condos for more than that. <BR/><BR/>Also, a 5% cap rate is ludicrous and by the time the default wave hits CORS, REIT spreads should widen.<BR/><BR/>A reasonable 8% cap would slash that $360k value by 38% to $225k.CPhttp://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-38884306173221383392007-06-06T17:36:00.000-07:002007-06-06T17:36:00.000-07:002007-06-06T17:36:00.000-07:00Matt, Glickman always says they lend at 60-80% of VALUE, not cost. He said this in a 8/30/06 WSJ article and again at the 4/23/07 annual meeting for shareholders. Therefore, it doesn't take much of a value decline before the equity and mezz piece gets wiped out. Also, why would you use a cap rate to value a condo development?duediligence007noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-59285451961544042492007-06-06T09:06:00.000-07:002007-06-06T09:06:00.000-07:002007-06-06T09:06:00.000-07:00Indeed, the risk is fairly obvious, but this is a bank, not a condo developer. If they are (as they say they are) lending at 60-80% of COST (not the developers inflated value number), then even if the project tanks they can simply take the building and sell it to a REIT at a 5% cap rate. Of course, being a bank, there's always the risk they just firesale the building, but I think this management team is smarter than that.Matthttp://www.blogger.com/profile/06939465490823343284noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-83240406011573298362007-06-04T17:09:00.000-07:002007-06-04T17:09:00.000-07:002007-06-04T17:09:00.000-07:00Not as bad as you say? there were 11k new condos absorbed from 1995-2004, cumulatively. That’s 1,100 condos per year, on average. So right now we have 22,000 existing condos on the Miami MLS system for sale, and another 20,000 condos under construction to be delivered over the next two years. This is a train-wreck waiting to happen.duediligence007noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-37753608622357210872007-06-04T00:01:00.000-07:002007-06-04T00:01:00.000-07:002007-06-04T00:01:00.000-07:00Old story, guys.<BR/>You are repeating 6 months old news?<BR/>Are You journalists or just copy writer?<BR/><BR/>The situation in Florida is not as bad as You say.Miamihttp://www.blogger.com/profile/00010651806078868445noreply@blogger.com