Luxury Real Estate News Roundup 10/27

Another Hong Kong Luxury Real Estate Bubble; Bulgarian Luxury Property Prices Slump 40% and the Biggest Real Estate Deal in New York Heads Towards Becoming the Biggest Foreclosure Instead and Yet Another “Mortgage Vehicle” Hits The Market

After new Hong Kong mortgage rules were introduced to curb another bubble in the luxury property market due to an influx of Chinese stimulus money, shares in Hong Kong property companies slumped, dragging down the Hang Seng by 1.6%, according to MarketWatch.

Property stocks were knocked lower in Hong Kong Tuesday on the first day of trading since the city’s central banker lifted the down payment required on luxury-home purchases to cool rapid price appreciation that has stirred concerns of an emerging real-estate bubble. Among developers’ stocks, Sun Hung Kai Properties Ltd. (HK:16 118.20, -4.10, -3.35%) (SUHJ.Y 15.41, -0.10, -0.64%)  fell 3.1%, while Cheung Kong Holdings Ltd. (HK:1 102.30, -3.20, -3.03%)  (CHEU.Y 13.30, -0.18, -1.34%)  (CHEUF 13.50, 0.00, 0.00%) eased 2.5%, Sino Land Co. fell (SNLA.Y 10.30, -0.10, -0.96%)  (HK:83 15.52, -0.88, -5.37%) 4.6%, and Hang Lung Properties Ltd. (HK:101 30.20, -0.90, -2.89%) (HLPP.Y 19.65, -0.26, -1.31%)  dropped 3.7%. Market watch

Luxury real estate prices in Bulgaria have slumped 40% since the beginning of the financial crisis and sales volumes have dropped by around 80%.

Luxury homes have diminished in value by about 40 per cent since the onset of the global economic downturn, while the number of sellers of such properties has doubled, real estate agency Unique Estates said on October 26, as by Dnevnik daily. Sophia echo

Biggest disaster in NYC real estate?

The looming disaster that was supposed to be the biggest deal in New York Luxury real estate history is about to come crashing down to become one of the biggest foreclosure disasers in New York luxury real estate instead. Back in 2006, an investment group paid $5.4 billion for 2 Manhattan apartment complexes – Stuyvesant Town and Peter Cooper Village. The intentional was to evict the rent controlled tenants and build yet another slew of luxury apartments which would then be sold for substantial profits.

But things did not go to plan. The tenants fought back, numerous lawsuits were filed, including a class action against MetLife, the original owners, delaying the development and a recent ruling in state court means that any rent increases are deemed “improper.” Even before the ruling, the value of the buildings had fallen well below the outstanding mortgages and a default seems likely.

Some of the biggest investors in the deal include the Florida State Board of Administration, which had invested $250 million; and the 2 largest California government pension funds – the California Public Employees’ Retirement System and the California State Teachers Retirement System, with $600 million invested between them.

You have to question the ethics of three large government-owned monetary giants gambling state money on being able to unlawfully evict rent-controlled tenants, but  gambling public money seems to be the current norm. No doubt the lawyers involved are rubbing their hands with glee at the fees they will be charging to sort this one out. Peter Cooper Village and Stuyvesant Town

Should be fun watching this one unfold.

In financial news, yet another “mortgage product” hits the markets with the introduction of the first “C5 Asset Recovery Company. ”

C5 Advisors announced the closing of the first proprietary C5 Asset Recovery Company (”ARC5(TM)”) for an $800 million commercial bank client which had no options for public sector assistance. This particular bank client will realize significant benefits not available in the current market via the private or public sector and expects to close additional follow-up ARCs over the next 6 months.  C5 is currently structuring ARCs for 12 other banks nationwide (ranging in size from $20-300+ million per ARC5(TM)).

If you can make head or tail of this (which is – I suspect – no more possible than understanding mortgage backed derivatives was) the full details are here C5 Asset Recovery Company