Want To See Where The Delinquencies Are?

I must say that the Wall Street Journal has done a great job in allowing us spectators (and participants, whatever the case may be) to visually see the progression of the subprime delinquencies around the country. The interactive map allows you to scroll over a county and see the delinquency rate for that quarter. The map will go back in time to Q1 2005 until Q2 2007.

One interesting note is the "light" shaded areas on the West Coast (delinquencies from 0% - 1%) in 2005 will then turn more shaded thru 2007, while the Central Valley turns to a bright shade of crimson (I'll let you figure out what that one means - affectionately coined as "blood alley") during the same time period.

The map really shows the extent of the problem as it permeates across the nation.

Wall Street Looking for Local Partners in Troubled Regions

Wall Street opportunists have been gearing up for local land grabs as builders and developers look to exit subprime-ravaged states. Most of these players are not experts in these local markets, so they're partnering with local developers/builders that know the markets, hoping to enter these markets at bargain prices with a 5 to 10 year hold anticipation.

Their plan is obvious in the wake of the real estate meltdown: buy these hard assets and wait until the markets bounce back. "The Rockefeller Group is actively researching Florida properties that may become available for purchase," a spokesman for the New York-based investment and real estate firm told Fortune. "There are definitely opportunities for homebuilders to sell some of the land they acquired when the residential market was very strong."

The explanation for this hot money pouring into land has to do with the fact that firms and funds have been raising capital for real estate purchases for the past decade, putting it to work whenever opportunity strikes. Land just happens to be a value play at this moment.

"Anywhere from two years to 18 months ago, the smart people saw prices, costs, and construction going through the roof. They knew they couldn't just finance builders," says Tom Shapiro, who runs real estate private equity firm GoldenTree InSite Partners. He adds that typical real estate funds, which invest in more than just land, have serious war chests to put to work.

Last year Apollo raised a $700 million Real Estate Opportunities fund that it has used to buy land in Arizona. And last month the Carlyle Group closed a $3 billion fund earmarked for U.S. real estate investments.

Then there are the specialists: Cypress Creek Capital Florida Land Investors, whose sole purpose is to bank land, plans to buy $200 million to $400 million worth over the next few years. The fund has looked at more than 300 deals and made several offers, says executive vice president Steven Beauchamp. He thinks it will be possible to buy at a discount as low as 40 cents on the dollar compared with what the current owner paid.

In Florida representatives for Goldman Sachs and Michael Dell's MSD Capital have also been looking at land investments since early this year, according to Jack McCabe of McCabe Research & Consulting, a residential research firm based near Boca Raton. "The home and condo builders bought big tracts at prices based on the height of the market," he says. "They can't sleep at night now because they're going down like the Titanic, so eventually a loss on a sale doesn't seem so bad."

Fortress and Carl Icahn are playing here too. In July, Fortress acquired Florida East Coast Industries, whose assets include a railway and a real estate development group that controls more than 4,000 acres of undeveloped land. Since January, Icahn has been agitating for control of Florida condo builder WCI, whose coastal land holdings some analysts say are worth as much as the book value of the company. Icahn won board seats in August.

Why is Wednesday (8/15) important?

I had a couple of interesting observations passed on this morning after speaking with several clients in the bay area that follow the markets (real estate and wall street). First, there is particular interest on Wall Street this Wednesday. It is the last day that that investors have (given the 45-day notice to withdraw funds requirement) to notify hedge funds of their intent to withdraw funds by the end of the third quarter. Below is an portion of the article emailed:

Unnerved by heavy losses at some of the $1.75 trillion industry's most famous offerings, including AQR Capital Management, Highbridge Capital Management, D.E. Shaw and Goldman Sachs (GS.N: Quote, Profile, Research), many people want out before things get worse.

But exiting can be a difficult process in an industry where managers routinely lock up money for months, if not years, and often require 45 days' advance notice before returning it.

To pull out at the end of the third quarter, investors will have to notify their managers by August 15.

"Everyone always waits until the last second to get out, and (Wednesday) is the last second," said Mike Hennessy, managing director at hedge fund of funds Morgan Creek Capital.

Another trader friend follows the market much closer than I and clued me into a video series that tracks the S&P as well as a precursor for the market in general (Goldman Sachs). The recent problems with the GS Hedge Funds is one of the stocks that he tracks with the market, a disciple of the video author's company, inthemoneystocks.com.