![]() Should prices be down 15 percent or more, such loans would be underwater. GE said $6.1 billion of its real estate debt portfolio matures this year, of which $1.6 billion has a loan-to-value ratio above 85 percent. Occupancy is “good,” it says, and GE is aggressive about renewing leases at the best possible terms. Valuing assets is hard when transaction volumes are down dramatically.Īlso, GE says many of its loans were underwritten at conservative loan-to-value ratios, while its real estate equity holdings are well diversified in markets that GE says it understands. To be sure, GE has said it plans to hold on to its portfolio and therefore does not need to mark it down under accounting rules. In April, the company said it did not have adequate visibility to predict the degree of losses in its commercial loan portfolio, but noted it expected a tough commercial real estate cycle given continued job losses. ![]() In an interview with Reuters, Sherin said GE evaluates whether properties are impaired on a quarterly basis, and took $100 million in real estate impairments in the latest quarter. That would add up to “an awfully big potential charge that’s being kicked down the road,” he said. Much of the company’s commercial real estate equity is not worth what GE paid for it - especially assets bought near the market peak in 20.ĭe Gan said GE should recognize the deterioration in commercial real estate markets and mark down its $84 billion portfolio by 2 to 5 percent. The financing needed to roll over a lot of the commercial debt coming due in the next few years is not available. “(GE is) hoping they can ride through this recession using held-to-maturity type accounting on everything, not mark it down, and wait for the market to recover under it so they don’t have to charge earnings.” “What GE is doing is not recognizing any impairment of any significance on this stuff,” said Jack De Gan, chief investment officer with Harbor Advisory Corp, which owns GE shares. ![]() commercial real estate - have led GE investors to question the company’s method of valuing its real estate holdings, an issue some say speaks to an overall lack of transparency at GE. recession, tight credit around the world and the rapidly declining value of U.S. NEW YORK (Reuters) - The potential for multibillion-dollar writedowns in General Electric Co’s $84 billion real estate portfolio is emerging as one of the key questions about the future of its GE Capital unit.ĭeepening concerns about global liquidity - given a prolonged U.S.
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