Even General Electric has been caught in the real estate downturn. The company is a large player in the commercial real estate game buying and selling large properties every year. The internal nickname for the real estate division in GE is “The Honey Pot”.

It is called The Honey Pot because it provides the company the ability to hit it’s earning numbers ever quarter. If they need to raise 300 million to hit the number, sell a building with 300 million in profit in it. It was not that easy, but in the complicated world of corporate finance, it was as good as it gets.

Now the company is caught on the other side of the equation. With property values dropping and 16 billion invested in real estate last year General Electric is upside down on many of their properties. So instead of making revenue they have assets that are depreciating.

No wonder GE’s stock is trading so low, the ability to massage their earnings just took a big hit. And according to the company, they expect no profits through 2009 from the real estate division.

Ouch.

Falling property values could also hurt GE by forcing it to take hits on its balance sheet. As of the end of last year, the estimated market value of its real-estate investments exceeded what the company had paid for the properties by about $3 billion.
But if, as expected, the commercial real-estate market continues to weaken, GE runs the risk of having to take a write-down on those investments. Nationwide, as office vacancies rise, retail sales slow and travel bookings plunge, commercial-property values have already fallen as much as 20% in many areas.via WSJ.com.

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