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Analyses are solely the work of the authors and have not been edited or endorsed by GLG.

At Best, an Incremental Step In the Right Direction

November 6, 2009

Analysis of:CMBS Savior? Developers Diversified Deal Is Nearer | online.wsj.com

The pending Developers Diversified ("DDR") transaction represents, at best, a marginal step in the right direction with respect to getting the CMBS machine back on track. The successful launch of a new CMBS transaction, and placement of the related bonds should be considered a victory given the dearth of CMBS deals over the past +12months. At the same time the nature/characteristics of the transaction and the requirement for government involvement highlight the challenges confronting the sector.

The Current Real Estate Downturn is Different

November 4, 2009

Analysis of:Real Estate Downturn of the Early ’90s Differs From Today’s Crash In Important Ways | nreionline.com

Unlike prior downturns where economic weakness compounded with addition of recently completed property supply contributed to commercial real estate downturn, the current downturn has been fueled by excessive use of creative debt financing. The unwinding of creative leverage will take longer than previously and could delay recovery.

PPIP is doing what it was designed to do.

October 24, 2009

Analysis of:Question Marks Still Remain for PPIP | www.globest.com

The primary function/purpose of PPIP was to provide price support to institutional investors holding structured investments. PPIP was not designed to provide a market bid for "toxic" assets. If it were, the program would have permitted inclusion of all structured assets - not just those rated AAA; similarly the program would have supported the purchase of ReRemics - the true "toxic asset" class.

The 3 legs of the valuation stool remain broken

October 21, 2009

Analysis of:Commercial Real Estate Poised to Disappoint | www.taipanpublishinggroup.com

Based on public equity valuations, where P/E ratios based on projected "E" are at all time highs it is hard to envision a scenario where Commercial Real Estate equity returns achieve positiive levels. Fundamentals remain weak, availability of debt financing remains constrained, and all expect a surplus of REO properties to hit the market over the next few years. The tree legs of the valuation stool - supply, debt financing, cash flow growth - are broken; not a pretty picture for valuations.

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