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GE Pays Price for Real Estate Bets

“Did we end up with too much exposure in certain areas during the credit bubble? Maybe, a few,” Immelt said in his annual letter to shareholders, released March 2. “Today, I wish we had less exposure to commercial real estate and U.K. mortgages.”

GE's commercial real estate business consists of both property and real estate loans. It has stakes in or financing on 8,000 properties in 2,600 cities, with an average investment of less than $10 million, according to regulatory filings. GE's property includes office buildings, warehouses and apartments, with about 71 percent located outside the U.S., primarily in Europe, Asia, Canada and Mexico, the company said.

“Our conservative underwriting of properties for which a valid value-add strategy (improve the building, re-lease, raise rents) was appropriate makes us comfortable with our portfolio,” GE spokesman Russell Wilkerson said in a statement yesterday. “We have business plans in place to improve properties where necessary. Many of these properties still carry below-market rents, providing us with protection and some upside.”

The company's property “portfolio generates $1.7 billion in net operating income, while we depreciate the assets by about $1.1 billion per year,” Wilkerson said. “This makes the properties cash-flow positive in the aggregate.”

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