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Nobody is selling real estate and few are buying it, so how do you value it?


The question dominated a panelist discussion that included the leaders of some of the largest real estate companies in the world. The consensus at the 14th annual North American Real Estate Equities conference, put on by CIBC World Markets, is the Canadian market will see little activity in 2009.


Pinned down on what Toronto's Scotia Plaza might fetch in today's market, Andrea Stephen, executive vice-president of Cadillac Fairview Corp., said she couldn't answer.


"It is difficult because there is a small pool of buyers," said Ms. Stephen who passed the question on to Tom Farley, chief executive of Brookfield Properties Corp. which is now building the Bay-Adelaide


Centre, the first new office tower in Toronto's financial core in 15 years.


Mr. Farley noted only three major assets have traded in the past seven years, the last being the TD Canada Trust Tower in Toronto. That was sold at $723/square foot, he said.


Ms. Stephen said that figure might be "little rich" in today's market, but said it's hard to establish a real price. When Cadillac, which is owned by the Ontario Teachers Pension Plan Board, bought the


Toronto-Dominion Bank's office tower assets the price was about $300 a square foot but that was eight years ago.


There is no real pressure on any of the major owners of Canada's office towers to sell, so the type of fire sales that have been seen in the United States are less likely.


"You have eight entities that control 90% [of the major towers]. It's ourselves and seven pension funds," said Mr. Farley. "We can weather the storm."


Not everyone on the panel was as confident about the Canadian market. David Henry, president of retail landlord Kimco Realty Corp. which is based in the United States but has some holdings in Canada, said


rental rates are "falling of the cliff." He did note the company's Canadian portfolio is holding up better than its U.S. holdings.


He said there will be merger opportunities as prices continue to fall.


Mr. Henry, said capitalization rates have been rising with alarming speed. The cap rate is the expected rate of return on a property, the higher the cap rate the less a property is worth.


"We saw cap rates go from 6 to 8.5 in the United States. It may not go as high [in Canada] but it could go to 8," he said, referring to the retail sector.


Dori Segal, the chief executive of First Capital Realty Corp., said he still hasn't seen the buying opportunities. "There is not a single grocery anchored shopping centre for sale in Toronto, Montreal,


Vancouver, Calgary or even Victoria for that matter," said Mr. Segal.

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People need to chill and wait for the economy to recover. There are good times ahead.


oh yeah i can't wait for the economy to get better in 10 years ! seriously these people who only see 5 years ahead are too short sighted !!!





we are currently in the eye of the storm, we've seen the first wave, now it's the quiet part, and early 2010- 2011, the fragilized banks worldwide will get hit by the second biggest wave.


The first wave was triggered by subprimes rates reset ( we all know that now).


Do you know what an ARM is? what an Alt-A is ? you're going to know soon.

Why do you think Obama and such are saying 'there are still tough times ahead' ??!


That's an euphemism, the tough times still haven't happened.


Before beeing laid, in january, I went to New York for a conference at Morgan Stanley's office, and the conclusion was that the upcoming financial effort needed to prevent a collapse of the Alt-A and ARM resets ( in 2010 and 2011, mostly) was beyond the US government's capacity.


One month later, I was beeing laid off like most of my coworkers in Montreal, and 3000 others in the USA.


Have a look at what is coming.





Of course, you must not forget the auto loans, credit card loans, bussiness loans, bankruptcies, unemployment and such.

The 2008 wave happened in a still relatively healthy economy.

the 2010-2011 wave will happen in a bleeding economy.

good times ahead? not so fast !!!

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Doom and gloom once again... when times are bad, everyone expects the worst. When times are good, everyone expects the best. It's the rule of the financial world.


If the adjustable rate mortgate reset crisis even occurs, i doubt it'll be as profound as you suggest. All your projections are speculative and don't factor in the variance of how the economy will recover in the interim.


Hey, i'm not saying you can't be right.. maybe you will be right.. though i hope you're wrong and i'm sure you hope so as well, for all our sakes. That being said, nobody knows with certainty what will happen.


Two reasons why a crisis might not even happen:


"First, the interest rate cuts orchestrated by the Fed are having the desired trickle down effect of putting downward pressure on the interest rates that various ARMs will reset at, and second, contrary to popular belief, most borrowers don't actually have mortgages with absurdly low initial interest rates, so they won't suffer too much damage."

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Qu'est-ce qu'un Mortgage Rate Reset?


to attract as many customers as possible, mortgage lenders used promotional 'teasing rates' , for example 1%, and other promo tools like 'pay only interest for the first 5 years, or in many cases pay LESS than the interest for the first 5 years.


the peak of underwriting was 2005-2006. (hence the predicted peak default of 2010-2011)


But after 5 years, the real mortgage rate ( often three or four times higher) kicks in, and the borrower also has to start refunding the principal of the loan.


In most cases, the monthly payment goes up between three and ten-fold, depending on the initial term.


So when you have some people struggling to pay their initial teaser rate, what do you do when the payment goes up? and at the same time the value of your house goes down ?? and you loose your job? and everything is gloomy? you default !!

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Have a look at this 60 minutes feature, produced in december 2008;



Very interesting and very educative about what is coming up

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