Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64401 Sat, 17 Nov 2018 17:18:13 GMT After the Retail Apocalypse, Prepare for the Property Tax Meltdown http://implode-explode.com/viewnews/2018-11-17_AftertheRetailApocalypsePrepareforthePropertyTaxMeltdown.html iehi-feed-64399 Thu, 15 Nov 2018 21:00:15 GMT "Too Big to Fail" author says WeWork may now be "too big to fail" http://implode-explode.com/viewnews/2018-11-15_TooBigtoFailauthorsaysWeWorkmaynowbetoobigtofail.html Andrew Ross Sorkin -- author of "Too Big to Fail" -- argues in his latest DealBook column for the New York Times that WeWork now has so much space in so many cities, its landlords can't afford to let it go under.

The co-working giant now controls 15.5 million square feet across 335 locations in 24 countries and says it is the largest tenant in Manhattan, Washington D.C. and London. So, when the next economic downturn arrives, WeWork's landlords might not be able to evict it even if it can't pay its rent... a more likely outcome would be for landlords to "swallow hard and renegotiate the lease agreements on more favorable terms to keep WeWork from creating a full-on panic." They could also have the company start acting as a property manager in the vein of Marriott, which manages rather than owns or leases hotels.

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iehi-feed-64394 Wed, 14 Nov 2018 14:56:07 GMT WeWork raises $3bn from SoftBank as losses balloon http://implode-explode.com/viewnews/2018-11-14_WeWorkraises3bnfromSoftBankaslossesballoon.html WeWork has secured an additional $3bn of funding from SoftBank at a $42bn valuation even as the flexible office provider's losses ballooned to $2bn on an annual basis.*SoftBank will inject the funding next year in exchange for a warrant enabling it to buy new WeWork shares by the end of September 2019, at a price that will lift the group's valuation from the $20bn figure reached in its last equity funding round.The fresh multibillion dollar commitment from SoftBank increases WeWork's cash pile and cash commitments to a total of $6.4bn, according to an investor presentation seen by the Financial Times on Tuesday.Artie Minson, chief financial officer, said the funding was "opportunistic". "The way we work with SoftBank emphasises speed and getting it done quickly . . . that speaks to the overall momentum in the business," he said.The fresh funding came as privately owned WeWork said its losses in the nine months to September had nearly quadrupled from a year earlier to $1.2bn.

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"Our view is that there is tremendous wind at our back -- we are the only serious global player out there," he said."Our growth is actually accelerating as our product offering continues to go deeper and reach not just small-sized companies but Fortune 500 companies and everything in between.

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iehi-feed-64389 Tue, 13 Nov 2018 17:39:29 GMT Borrowers Flee Empty Malls, and Bond Investors Brace for Fallout http://implode-explode.com/viewnews/2018-11-13_BorrowersFleeEmptyMallsandBondInvestorsBraceforFallout.html Things are getting worse for malls across America. So much worse that their owners are walking away early from struggling properties, a trend that has mortgage bond investors bracing for losses.

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"Experienced borrowers will act in their economic interest and will turn in the keys to malls that don't merit further investment. They don't want to service the loan anymore," Edward Reardon, head of CMBS research at Deutsche Bank, said in a phone interview. "We think the number of malls that don't merit investment will expand."

This is happening because malls are losing anchor stores and as a result would have to significantly cut rents for existing occupants, Reardon said, noting that mall owners fleeing their properties early is a "relatively new phenomenon."

That may mean trouble ahead for investors. While the delinquency rate in the CMBS market is now at post-crisis lows, the mall-related pain may not show up for a couple years, according to analysts. That's because the securities with the highest exposure have loans that won't mature until 2021 or later.

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iehi-feed-64388 Tue, 13 Nov 2018 17:31:49 GMT Anatomy of the Housing Downturn in Vancouver http://implode-explode.com/viewnews/2018-11-13_AnatomyoftheHousingDownturninVancouver.html iehi-feed-64385 Sun, 11 Nov 2018 21:08:50 GMT Doug Noland: Back to Fundamentals http://implode-explode.com/viewnews/2018-11-11_DougNolandBacktoFundamentals.html For me, Back to Fundamentals means a return of "Periphery to Core Crisis Dynamics" - rising yields, widening Credit spreads, de-risking/deleveraging, faltering global liquidity and, to be sure, China... Odds are mounting that de-risking/deleveraging dynamics attain destabilizing momentum. Many hedge funds now have losses for the year, which forces managers to take down both risk and leverage in anticipation of year-end outflows. I believe deleveraging is having a growing impact on marketplace liquidity around the world - and across asset classes. Yields are rising and spreads are widening throughout global fixed-income. Unstable equities markets around the globe are indicating a fragile liquidity backdrop. And this week's $2.68 (4.3%) drop in WTI has all the appearances of a major leveraged speculating community panic liquidation (portending challenges for the - to this point - resilient junk bond market).

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At this point, I seriously doubt the Fed has a solid grasp of the (direct and indirect) sources of the Trillions of global liquidity that have flooded into U.S. securities and asset markets over the past decade. I take them at their word that they don't discern the degree of leverage that would typically indicate a Bubble. Yet this has been the most atypical of global Bubbles. I am not convinced the Fed knows where to look for the leverage most germane to today's global Bubble. And, I'm compelled to add, the whole world seems oblivious. Speculative deleveraging is not on the Fed's radar, and this is a problem for the markets.

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iehi-feed-64383 Sun, 11 Nov 2018 20:18:46 GMT New York City Raids Condo Building in Crackdown on Airbnb Rentals http://implode-explode.com/viewnews/2018-11-11_NewYorkCityRaidsCondoBuildinginCrackdownonAirbnbRentals.html A team of New York City law-enforcement officers swarmed a Manhattan condominium last month, issuing 27 notices of violations for illegal hotel use in one of the largest crackdowns on short-term rentals such as those listed on Airbnb.

The raid at the Atelier, a 46-story Midtown luxury tower, may be a sign of what's to come. New York and other cities are seeking to limit short-term rentals that can run afoul of local laws designed to limit hotel-style stays in residential buildings.

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iehi-feed-64379 Fri, 09 Nov 2018 22:57:32 GMT Father of Z-Score Sees Bigger Bankruptcies in Next Downturn http://implode-explode.com/viewnews/2018-11-09_FatherofZScoreSeesBiggerBankruptciesinNextDownturn.html Edward Altman, who developed the Z-score method for predicting bankruptcies 50 years ago, says the next recession will be characterized by many more bankruptcies and defaults than in previous downturns, and the corporate failures will be larger than ever before.

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More firms that look like they are going bankrupt don't. Over the last 50 years, it's clear that the average company in the world is more leveraged using more debt than ever before. There was no leveraged-loan or junk-bond markets 50 years ago. Now, these are big dynamic markets available to many firms. They take advantage of it. Interest rates in the last ten year have been low and firms have been overjoyed to leverage their balance sheet to try to earn returns greater than the cost of capital. And the cost of capital, with the lower costs of interest rates, has come down.

... There is a dramatic increase in leveraged loans, in covenant-lite issuance. The defaults will not take place as quickly as they normally would because there are no easy triggers from these covenants. But when they do take place, the ultimate recovery when the firm emerges from Chapter 11 will be lower because the covenant-lite debt kicked the can down the road.

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iehi-feed-64376 Fri, 09 Nov 2018 15:20:42 GMT The tragedy of Amazon's HQ2 selections, explained http://implode-explode.com/viewnews/2018-11-09_ThetragedyofAmazonsHQ2selectionsexplained.html America needs to find a way to do better than this. Being the home to a very large share of the world's most dynamic high tech companies is an incredible source of national strength, but in practical terms it does not benefit most Americans. With better policy it could.

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Over a decade ago, housing economists Janna Matlack and Jacob Vigdor investigated the economic impact of unequal economic development and found that "in tight housing markets, the poor do worse when the rich get richer."

A "tight" housing market, in this case, is a market like greater New York or greater Washington, where the cost of buying a house greatly exceeds the actual construction costs of new buildings. The problem in markets like this is that when the rich get richer -- say because a new office complex opens and hires 20,000 to 30,000 people for six-figure salaries -- the price of scarce housing rises.

If you actually get a job at Amazon or have the kind of job skills that you plausibly could get a job at Amazon, this will pay off for you because you'll end up with higher wages that more than equal the higher rent. But if you work in a restaurant or cut hair or clean houses or a drive cab, you'll probably end up worse off.

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iehi-feed-64374 Thu, 08 Nov 2018 21:26:58 GMT Report: Google Planning Major Expansion in NYC http://implode-explode.com/viewnews/2018-11-08_ReportGooglePlanningMajorExpansioninNYC.html ``Google is planning a major expansion in New York City that would make room for more than 12,000 new workers, The Wall Street Journal reports. Sources cited by the Journal late Wednesday said the company is close to finalizing a deal to buy or lease a 1.3 million-square-foot building in the West Village set for completion in 2022, with additional plans to expand its existing property at Chelsea Market. All together, the expansions would make room for 20,000 staff--potentially pitting the company against Amazon, which could bring approximately 25,000 jobs to the city if it settles on New York for its second headquarters. A year after announcing plans to expand, the Seattle-based retail giant is said to be considering dividing its second headquarters between New York's Long Island City and Northern Virginia's Crystal City.''

This is pretty surprising given how bad public transit has gotten in NYC.

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iehi-feed-64369 Thu, 08 Nov 2018 02:45:38 GMT California rejected rent control, but Sacramento may do it http://implode-explode.com/viewnews/2018-11-07_CaliforniarejectedrentcontrolbutSacramentomaydoit.html Prop. 10. would have overturned the state's Costa Hawkins Rental Housing Act, which bans local governments from imposing rent control on any apartment built since 1995. It also bans rent control as well on any single-family residence that is being used as a rental unit.

Had Prop. 10 passed, the Sacramento effort would have covered all renters throughout the city.

Instead, the Sacramento rent control initiative likely will affect about 72 percent of the city's 106,000 rental units, based on numbers from the city of Sacramento rental housing inspection program, Pariset said...

The proposal, called the "Sacramento Community Stabilization and Fair Rent Charter Amendment," stipulates that annual allowable rent increases could range from a maximum of 2 percent per year up to a maximum of 5 percent each year.

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iehi-feed-64333 Fri, 26 Oct 2018 17:38:56 GMT Here Comes The Housing Bust "Reverse Wealth Effect," (AU, UK and CA kick into full downswing) http://implode-explode.com/viewnews/2018-10-26_HereComesTheHousingBustReverseWealthEffectAUUKandCAkickintofulld.html House prices ‘falling by over $1,000 a week' in Sydney and Melbourne, Deloitte says... The boom time is over and we're now officially experiencing the "house price fall we had to have", according to Deloitte Access Economics's latest business outlook.

It has found what many had been predicting: prices are dipping as interest rates are rising, with our biggest cities feeling the winds of change most keenly.

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The above chart shows that the UK -- which had an epic housing boom along with, not coincidentally, one of the world's most extreme consumer credit bubbles -- now has falling home prices. Australia just tipped into negative territory with Canada right on the cusp.

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iehi-feed-64327 Wed, 24 Oct 2018 23:33:51 GMT New Home Sales Drop Sharply; Near 2 Year Lows http://implode-explode.com/viewnews/2018-10-24_NewHomeSalesDropSharplyNear2YearLows.html iehi-feed-64311 Fri, 19 Oct 2018 19:13:53 GMT New York's luxury real-estate market is crashing http://implode-explode.com/viewnews/2018-10-19_NewYorksluxuryrealestatemarketiscrashing.html iehi-feed-64307 Thu, 18 Oct 2018 23:07:01 GMT Trump May Have Intervened in FBI HQ Decision To Protect His Hotel http://implode-explode.com/viewnews/2018-10-18_TrumpMayHaveIntervenedinFBIHQDecisionToProtectHisHotel.html iehi-feed-64306 Thu, 18 Oct 2018 23:00:57 GMT Trump's Name Is Removed From Another New York Building http://implode-explode.com/viewnews/2018-10-18_TrumpsNameIsRemovedFromAnotherNewYorkBuilding.html Another Trump-branded building will pry President Donald Trump's name off its facade following a vote by condo residents, who cited antipathy, security risks and reduced property values.

A 46-story tower at 200 Riverside Blvd. on Manhattan's Upper West Side will remove the giant brass "TRUMP PLACE" letters on Thursday, The New York Times reported.

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Nearly 70 percent of the condo owners voted this fall to remove Trump's name, despite the estimated $23,000 cost to pry off the letters and clean the facade, the Times reported. Residents first voted to remove the name shortly after Trump's 2017 inauguration.

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iehi-feed-64301 Thu, 18 Oct 2018 00:39:30 GMT FBI looking at Manhattan DA over potential corrupt quid pro quos (INCL. TRUMP KIDZ' CASE) http://implode-explode.com/viewnews/2018-10-17_FBIlookingatManhattanDAoverpotentialcorruptquidproquosINCLTRUMPK.html In another case, the DA also failed to bring criminal charges against two of President Trump's children in an alleged real estate scam. Vance's office cleared daughter Ivanka Trump and son Donald Trump Jr., who were being looked at for allegedly defrauding Trump SoHo investors and would-be buyers by lying about the number of condos that had been sold.

In 2012, Vance met with an attorney for the pair, Marc Kasowitz, who had previously given him $25,000. An additional $32,000 was donated after the office declined to prosecute Ivanka and Trump Jr.

Vance returned Kasowitz's first installment prior to the sit-down. He gave back the second sum of cash in October 2017 after he was criticized for not going forward, and for taking the lawyer's money.

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iehi-feed-64297 Tue, 16 Oct 2018 15:29:17 GMT Why New York Has So Many Empty Storefronts http://implode-explode.com/viewnews/2018-10-16_WhyNewYorkHasSoManyEmptyStorefronts.html Separate surveys by Douglas Elliman, a real-estate company, and Morgan Stanley determined that at least 20 percent of Manhattan's street retail is vacant or about to become vacant... From 2010 to 2014, commercial rents in the most-trafficked Manhattan shopping corridors soared by 89 percent, according to ­CBRE Group, a large real-estate and investment firm. But retail sales rose by just 32 percent. In other words, commercial rents have ascended to an altitude where small businesses cannot breathe.

... the 2018 landlord waiting game is denuding New York of its particularity and turning the city into a high-density simulacrum of the American suburb. The West Village landlords hoping to lease their spaces to national chains are turning one of America's most famous neighborhoods into a labyrinthine strip mall. Their strategy bodes the disappearance of those quirky restaurants, curious antique shops, and any coffee shops that aren't publicly traded on the NYSE.

In Jane Jacobs's famous vision of New York, the city ideally served as a playful laboratory, which nursed new firms and ideas and exported its blessedly strange culture to the world. Today's New York is the opposite: a net importer of the un-weird, so desperate to bring in national chains to pay exorbitant leases that landlords are willing to sit on barren blocks.

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iehi-feed-64252 Wed, 03 Oct 2018 01:59:44 GMT Report: Donald Trump Committed Tax Fraud to Receive Equivalent of $413 Million From His Father http://implode-explode.com/viewnews/2018-10-02_ReportDonaldTrumpCommittedTaxFraudtoReceiveEquivalentof413Millio.html Trump and his siblings specifically tinkered with the valuation of their father's real estate empire in order to avoid taxes, according to the report. They took over Fred Trump's company in November 1997 and, the report claimed, intentionally lowered the value of the properties in order to avoid paying heavy taxes.

In another instance, according to the Times, Trump and his siblings used a company called All County Building Supply & Maintenance to buy supplies and equipment for Fred Trump's buildings. However, the company only claimed such purchases that had already been made by Fred Trump's company and increased how much the items cost. Effectively the money spent was untaxed gifts that the president, his siblings, as well as a cousin, gained as owners of the company.

In a statement to Newsweek after the publication of the Times' story, the New York State Department of Taxation and Finance said it was looking into the allegations.

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iehi-feed-64247 Tue, 02 Oct 2018 01:41:17 GMT Housing Market Slows, as Rising Prices Outpace Wages http://implode-explode.com/viewnews/2018-10-01_HousingMarketSlowsasRisingPricesOutpaceWages.html By nearly any measure, this city is booming. The unemployment rate is below 3 percent. There is so much construction that a local newspaper started a "crane watch" feature. Seemingly every week brings headlines about companies bringing high-paying jobs to the area.

Yet, Denver's once-soaring housing market has run into turbulence. Sales and construction activity have slowed in recent months. Houses that would once have drawn a frenzy of offers are sitting on the market for days or weeks. Selling prices are rising more slowly, and asking prices are being slashed to attract buyers.

Similar slowdowns have hit New York, Seattle and even San Francisco, cities that until recently ranked among the nation's hottest housing markets. The specifics vary, but economists, real estate agents and home builders say the core issue is the same: Home buyers are reaching a breaking point after years of breakneck price increases that far exceeded income gains.

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The recent slowdown, however, is unlikely to give would-be buyers... much relief. Prices in Denver are still up 8 percent over the past year, according to the S&P Case-Shiller index. That's cool compared to the double-digit gains of a couple years ago, but well ahead of the 6 percent increase in average hourly earnings over the same period. Rising interest rates have also made buying homes more expensive.

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Over all, however, the housing market is not behaving as the textbooks say it should. Inventories remain low despite the recent increases, and new construction is slowing, not picking up.

Part of the problem, local real estate agents say, is that the furious pace of price growth has essentially gummed up the market, making homeowners reluctant to sell for fear of being unable to find a new home.

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Rising interest rates are compounding the problem because would-be sellers do not want to give up their low interest rates, a phenomenon economists call the lock-in effect.

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