From: GCTHORNE@idbsu.idbsu.edu ("Broward "Big Boom" Horne")
Subject:      Re: Game over ( was Income & Wealth & Bankruptcy
Date: Fri, 09 Oct 92 07:56:35 MST
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Subject:      Re: Income & Wealth
Date: Thu, 08 Oct 92 11:43:47 MST

Subject:      Re: Income & Wealth
Date: Thu, 08 Oct 92 08:03:37 MST

>    Interesting speculations - If the Japanese banking system does collapse,
>    or should I say, *when* it collapses and *if* it isn't propped up,
>    in all likelyhood large commercial real estate holdings in Los Angeles
>    are getting dumped.  Most of the big banks in L.A. are Japanese.
>    Sayanora, real estate prices.  Sayanora, Citibank and BofA.

           Chris questions my speculation above.  Okay.  Here's some
     numbers I worked out last night.

     For the U.S. -

     Commercial real estate - 1 billion sq feet are empty right now.
                              Vacancy rate now - 19%  Normally - 5-6%

     Okay, using these numbers, we can figure roughly what bank losses
     are at the moment.  Figuring that the banks targeted 6% as a normal
     vacancy rate, then add in another 2% of lag time to fill up a new
     building, maybe another 2% for profits.  So I guesstimate that
     anything above a 10% rate is lost revenue.

            That works out to ( 1 Billion ) X ( 10% / 19% ) =
     around 500 million square feet.  Another guesstimate, say .50 / sq ft
     / month in leasing = losses in expected revenues of around
     3 billion per year.  Okay.  Remember this number

            We can figure L.A.'s percentage as a rough parallel to it's
     percentage of population, 5%.  So, in all likelyhood, L.A. is
     accounting for 150 million per year in losses.  This is almost
     certainly too conservative.

            Japanese banks funded roughly 10-15% of these projects, so
     they're eating 15-20 million per year.

            In addition, L.A. commercial property will grow by about
     another 20% in the next two years due to now-completing projects.
     The Japanese funded about 30% of these.  And, we can also assume
     that just about all of this 20% coming on-line will ALSO be
     a loss.  That works out to another 150 million per year in losses,
     with the Japanese share equalling 45 million per year.

            So, the Japnese banks can pretty much count on eating
     60-65 million per year.  Next fact -

            At current growth rates, these excess vacancies will not
     return to "normal" vacancy rates for 12 years.  At most optimistic
     estimates, assuming the economy proceeds at previous historical
     rates, 7 years.

            That leaves the Japanese banks to gulp down around
     300 million dollars in the next decade.

            These are the same companies that have begun laying skilled
     workers off, to save a few million per year in salaries and benefits.

            Now, back to the 3 billion / year in total losses.
     Using the same numbers, we can figure on total bank losses of
     1.5 billion per year for the next 10 years.  This assumes that
     no other projects will complete during that time, which, looking
     at Los Angeles, looks pretty naive.

            There will be additional losses in industrial
     property, retail property, hotel property, and rental property.
     over the next  2-3 years.  Retail property looks to lose around
     200 million over the next 3 years.
Newsgroups: misc.invest