The potential for multibillion-dollar writedowns in General Electric Co’s $84 billion real estate portfolio is emerging as one of the key questions about the future of its GE Capital unit.
Deepening concerns about global liquidity — given a prolonged U.S. recession, tight credit around the world and the rapidly declining value of U.S. commercial real estate — have led GE investors to question the company’s method of valuing its real estate holdings, an issue some say speaks to an overall lack of transparency at GE.
“What GE is doing is not recognizing any impairment of any significance on this stuff,” said Jack De Gan, chief investment officer with Harbor Advisory Corp, which owns GE shares.
“(GE is) hoping they can ride through this recession using held-to-maturity type accounting on everything, not mark it down, and wait for the market to recover under it so they don’t have to charge earnings.”
Read Nick Zieminski’s full article “Big real estate writedown potential overhangs GE” in Reuters (July 20, 2009).