Man, they’ve got such good slogans. Thursday morning’s entertainment will be brought to you by GE, whose illustrious AA+ finance arm will be reporting on its commercial real estate holdings. (Light bulbs + real estate = synergy!)
An idea of what we’ll be looking at:
Other companies have been clobbered by steep declines in the value of office buildings, apartments, stores, hotels and other commercial property. The Dow Jones REIT index has slid 60% in the past 12 months. Private-equity firms that specialize in real estate are reporting losses of as much as 60% for funds invested recently.
GE has been much more generous in its approach to its holdings. So far, GE has said its $34 billion in property could fall in value by about 1.5% this year, amounting to a pretax loss of as much as $500 million.
Hmm. 60%… vs 1.5%.Wut?
Well, we’re comparing it to the market. GE has always held that its properties are long-term investments, and thus should not be subject to the mark-to-market whimsies of everyday investors who have cut and run from everything that smells like fail. However, if you’re not marking to market, you’re marking to a model that includes free cash flow – which you’re not getting from those empty offices and retail stores. Just a wild guess, that’s probably down a little bit more than 1.5% (see also: Ackman, Bill). Also, in moves sure to bolster the bottom line, GE added a net of $9.7 billion worth of r/e to their portfolio near the top of the market in 2007, and had been snapping up Eastern and Central Europe property left and right over the last few years.
It’s enough to make a girl wonder why their stock has rebounded 80 or 90 percent in the last couple weeks, for sure. Pledge: If GE sees a 5 handle again by the end of Q2, I will mail Jeff Immelt a ShamWOW. It’ll be up to him whether he wants to use it as a crying towel or try to see if it will absorb some of GE Capital’s losses.