So on Thursday, we’ll see the real estate portfolio of GE Finance arm.  Supposedly real estate is a huge driver of earnings for GE finance but no longer.  According to GE, it has 34 billion in commercial real estate of which 16.6 billion was acquired in 2007!!!  Which was basically the top which included some Chicago buildings purchased from Blackstone who bought it from Equity Office Properties of Sam Zell who then sunk his gains into the failing Tribune.  Sam still came out on top though.  Anyways, GE says that 80% of the properties were bought cash and only 20% is mortgaged so that means they will not need to sell properties at a fire sale unlike other REITs may in the coming months and year or so.  

So GE marked down that commercial real estate portfolio 1.5%.  Yes one and one half percent.  Why do you ask they have only marked it down so little when commercial real estate has dropped at least 20% in value.  Well they say they aren’t planning to sell them.  That may come back to haunt them as they may need to raise money because if you book 20% losses on 34 billion, you get a loss of 6.8 billion dollars.  But they say that they don’t need to mark them down also because of their cash flow and income.  Suprise surprise.  Rents are going down and vacancies are going up and commercial real estate bottoms years after residential.  Residential hasn’t bottomed yet so commercial is still at least a couple years away.  So let’s see how Mr. AAA AA Plus, GE can figure how to get out of this mess.

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